Although the domestic currency has been trading a few paise below the 80 level on several days this month, breaking this mark is seen as a significant event as it was a psychological level at which the central bank was defending the currency. . Sellers were waiting for this level to trigger a round of dollar selling on Tuesday.
A depreciation of the rupee against the greenback is likely to impact across sectors and could increase import costs, increase foreign education costs, make foreign debt costlier for companies and have the potential to fuel inflation, which was previously Already ruling at 7%. One positive effect can be that remittances from overseas can be lucrative.
The rupee crossed a new milestone after a steady weakness of nearly 7% since the Russian invasion of Ukraine in February. The conflict has kept crude oil prices above the $100 level for five consecutive months, widening the current account deficit. Simultaneously, foreign institutional investors are in exit mode by selling equities worth around $30 billion this year. This has also been triggered by sharp interest rate hikes. US Fed In its fight against high inflation of more than four decades. The rupee crossed the 80 level of 851 after hitting 75 for the first time on March 20, 2020 in a sell-off after the outbreak of Covid-19.
The rupee weakened despite the dollar strengthening against major currencies. Analysts said the possibility US Federal Reserve Interest rates have gone up one percentage point and many were predicting a 75-basis-point increase.
The rupee strengthened on gains in the dollar index after trading at a low of 80.06 in the morning session. The rupee finally closed at 79.95, up three paise over Monday’s close.
Responding to the exchange rate movement, Economic Affairs Secretary Ajay Seth on Tuesday said there is no need to be overly concerned about the rupee depreciating. reserve Bank of India Managed it well in terms of volatility.
“The pressure on the rupee still remains. While the dollar index has softened and the pressure on other currencies eased, the rupee has a weakening trend,” said Hariprasad MP, executive director and business head, Ebixcash World Money.
He added that at 80 level, there is some selling pressure, and the exchange rate may meet resistance at 80.25-80.30 level, as RBI allows rupee to trace its level gradually.
“It is unlikely that people will discontinue their travel plans as the movement of the rupee is generally one-way. Most of the passengers can afford to cut down a little bit,” he said.
According to KN Dey of United Financial Consultants, most of the foreign inflows have come to a standstill due to the weakening of the rupee. This includes non-resident Indians, foreign investors and external commercial borrowing lenders.
“If the rupee remains stable for a few days, we may see a reversal and the rupee may see a correction on the upside to 79.30-79.50, 80.40 I think. But this is subject to only a 75 basis points hike in rates by the US Fed on July 27,” he said. If the rate hike is an absolute percentage point, the dollar index will rise, and the pressure on the rupee will resume.
watch Rupee touches 80 mark for first time in intra-day trade, 79.98 against dollar closed on