The Indian rupee on Tuesday breached the psychologically significant level of 80 against the US dollar for the first time. The local currency opened the day at 79.98 per US dollar against the previous close of 79.97. Then, it immediately hit a record low of 80.0175 in early trade. Rising trade deficit, continuous outflow of foreign portfolio investors and rising crude oil prices have kept rupee under pressure for some time now. It has dropped nearly 7 per cent against the US dollar this year.
The Indian rupee has declined by about 25 per cent since December 31, 2014, finance minister Nirmala Sitharaman said in the Lok Sabha on July 18. The global factors such as the Russia-Ukraine conflict, soaring crude oil prices and tightening of global financial conditions are the main reasons behind the fall of rupee, finance minister pointed out.
Foreign portfolio investors have withdrawn about $14 billion from Indian equity markets in 2022-23 so far, Sitharaman said. The outflow of foreign portfolio capital is a major reason for the depreciation of the Indian rupee, she added.
India’s merchandise trade deficit widened to a record $26.18 billion in June. The trade deficit stood at $24.3 billion in May. Record-high trade deficit also added pressure on the domestic unit.
The US dollar hovered on Tuesday just above a one-week low reached overnight versus major peers. The dollar index – which gauges the greenback against six counterparts – was flat at 107.47.
Rupee Outlook for Investors
“Pull back above 79.95 has negated the bear move, rendering the overall trend neutral, awaiting a directional push. The 79.95 region will continue to be key, with 79.85-80.15, the narrow band in which USD-INR is expected to be in today,” said Anand James, chief market strategist at Geojit Financial Services.
“The Indian rupee is expected to open flat to weaker this Tuesday morning weighed down by outflows and high oil prices. Lack of intervention from the RBI could also weigh on sentiments. So, the rupee could open around 79.99-80.00 per dollar this Tuesday morning from 79.97/dollar close in the previous session. USD-INR pair range for the pair this Tuesday’s session is 79.75-80.12,” said Sriram Iyer, Senior Research Analyst at Reliance Securities.
“The rupee has finally breached the 80-mark, a key psychological level. The rupee is expected to further slide due to the current severe rate hike by the US Fed, relentless selling by foreign investors, and the rising demand for the USD due to its safe haven status. Nevertheless, the RBI is aware of the falling rupee quagmire and could take actions to curb the further depreciation, thus we expect further downside to 81 to 81.5 levels,” Punit Patni, equity research analyst, Swastika Investmart.
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