The Indian rupee total hit a record low for seventh straight session straight by falling to 80 per US dollar but went on to recover lost ground against the greenback owing to interventions by Reserve Bank of India (RBI) and persistent sales of dollars by dealers, exporters said.
The rupee dive to its lifetime low of 80.6 per US dollar, weighed down by surge in oil prices and broad strength in US dollar. The rupee has closed at 79.97 on Monday. The rupee has depreciated 7.01 per cent againt the dollar this year.
The rupee was managed well and there was nothing to be “overtly” worried about the depreciation in the domestic currency against the dollar, said the government. The rupee had appreciated against several global currencies like the British pound, Japanese yen, and Euro, and this had made imports in these currencies cheaper compared to the dollar, said Economic Affairs Secretary Ajay Seth.
PTI said the rupee recovered from its all-time low of 80.06 to close 6 paise higher provisionally at 79.92 against the US dollar on Tuesday, tracking its regional peers and a positive trend in domestic equities, from the previous close of 79.98, said PTI.
The falling rupee may adversely impact central government finances through a higher subsidy bill, even though higher import bill may yield additional government revenues, economists said.
“The Indian rupee broke the level of 80 after many days’ failed efforts by the dollar bulls amid higher crude oil prices. However, the central bank’s intervention and stronger regional currencies and equities supported the rupee to erase early morning losses,” Dilip Parmar, Research Analyst at HDFC Securities, told PTI.
While the rupee breached the psychologically significant 80-per-dollar mark on Tuesday, currency traders said a confluence of factors had lent support to the currency. These included the RBI’s intervention at the 80 level, a weaker dollar index, strength in domestic equities, and firm dollar sales by banks on behalf of exporters.
“The rupee is going to weaken further; that is a given. But how soon and how much will depend on the RBI,” a senior trader at a private bank told Reuters.
Like most Asian currencies, the rupee has been falling in recent months as risk aversion has risen on expectations of the US Federal Reserve raising rates aggressively to curb high inflation and prompting investors to flee riskier assets. With a large part of the rupee’s 7 per cent year-to-date depreciation having occurred over the last month, several traders were of the view that the currency might not fall much from current levels.
The Reserve Bank of India has been intervening in both the spot and forwards markets to slow the rupee’s fall and has taken several measures in recent weeks to boost foreign fund inflows.
In 2022, foreign investors have made net sales of Indian shares totalling more than $30 billion, and traders said unless this trend reverses, the downward bias on the rupee will continue.