Rupee at record low; Hits 80 per US dollar for the first time

The Indian rupee on Tuesday crossed the psychologically important 80 level against the US dollar for the first time. The local currency opened at 79.98 per US dollar against the previous close of 79.98. Then, it immediately hit a record low of 80.0175 in early trade. Rising trade deficit, frequent outflow of foreign portfolio investors and rising crude oil prices have kept pressure on the rupee for some time now. This year it has fallen about 7 per cent against the US dollar.

The Indian rupee has depreciated by about 25 per cent since December 31, 2014, Finance Minister Nirmala Sitharaman said in the Lok Sabha on July 18. Global factors such as Russia-Ukraine conflict, rising crude oil prices and tightening global financial conditions are the main reasons behind the rupee’s depreciation, the finance minister said.

Sitharaman said foreign portfolio investors have pulled out around $14 billion from Indian equity markets so far in 2022-23. He said that outflow of foreign portfolio capital is a major reason for the depreciation of the Indian rupee.

India’s trade trade deficit widened to a record $26.18 billion in June. The trade deficit in May was $24.3 billion. Record-high trade deficit also put pressure on the domestic unit.

The US dollar was hovering above a one-week low on Tuesday, reaching overnight gains against major peers. The dollar index – which gauges the greenback against six peers – was flat at 107.47.

Rupee Outlook for Investors

“The pull back above 79.95 has negated the bears move, turning the overall trend neutral, waiting for a directional push. The 79.95 zone will remain crucial,” said Anand James, Chief Market Strategist, Geojit Financial Services, With 79.85-80.15, the narrow band in which USD-INR is expected to be in today.

“The Indian Rupee is expected to weaken from weak to weak this Tuesday morning, underpinned by outflows and higher oil prices. The lack of RBI intervention could also weigh on sentiment. Therefore, the rupee may open around 79.99-80.00 per dollar this Tuesday morning as against the close of 79.97 per dollar in the previous session. The USD-INR pair range for the pair in this Tuesday’s session is 79.75-80.12, ”said Shriram Iyer, Senior Research Analyst at Reliance Securities.

“The rupee has finally crossed the 80 mark, which is a major psychological level. The rupee is expected to depreciate further on the current severe rate hike by the US Fed, continued selling by foreign investors and rising demand for USD due to safe haven conditions. Nevertheless, RBI is aware of the depreciating rupee crisis and may take action to prevent further depreciation, thus we expect further downside to 81 to 81.5 levels,” said Puneet Patni, Equity Research Analyst, Swastika Investmart.

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