The rupee recovered after breaking the key USD 80 per dollar mark for the first time on Tuesday, reaching seven straight intra-day record lows for the seventh straight session.
Bloomberg reported that the rupee was last at 79.9487, after trading within the range of a high of 79.8675 and a low of 80.0600 against the greenback during Tuesday’s session.
That’s the first time the rupee has passed $80 a dollar, a new low.
PTI said the rupee recovered from its all-time low of 80.05 to close 6 paise higher at 79.92 against the US dollar on Tuesday, tracking its regional counterparts and a positive trend in domestic equities, from the previous close of 79.98.
The Indian rupee broke the 80 level after many days of failed efforts by the dollar bulls amid higher crude oil prices. However, intervention by the central bank and stronger regional currencies and stocks helped the rupee recover early morning losses. erasure,” Dilip Parmar, a research analyst at HDFC Securities, told PTI.
Mr Parmar went on to say that the near-term consolidation in the rupee is likely to take place along with the dollar index ahead of the European Central Bank (ECB) and the Bank of Japan policy meetings on Thursday.
Reuters reported that the Reserve Bank of India intervened in the foreign exchange market to stabilize the rupee after it weakened to 80.05 per dollar, a seventh session low.
“The rupee will continue to weaken; that’s a given. But how quickly and how much will depend on the RBI,” a senior trader at a private bank told Reuters.
A recovery in domestic equities also benefited the Indian currency.
Like most Asian currencies, the rupee has fallen in recent months as risk aversion has increased over expectations that the US Federal Reserve will raise interest rates aggressively to curb high inflation and prompt investors to flee riskier assets.
The dollar hovered just and below its multi-year highs, but hit a one-week low against major competitors overnight as markets reduced the chance of a Federal Reserve rate hike by a percentage point this month.
The Reserve Bank of India has intervened in both the spot and futures markets to slow the decline of the rupee and has taken several measures in recent weeks to stimulate foreign fund inflows.
But traders said the rupee was hurt by a severe dollar shortage and expected India’s current and trade account deficits to continue to widen.
While a rebound in Indian benchmark stock indices on Tuesday helped stabilize the rupee, traders warned that this could be just a temporary reprieve.
“The depreciation of the rupee will improve margins for IT companies in the near term,” Tanushree Banerjee, co-head of research at Equitymaster, told Reuters.
“That said, the upward margin may be limited due to higher staffing and travel costs. Also, dollar contracts could be renegotiated over time and margins normalized.”
So far, foreign investors have realized net sales of Indian stocks totaling more than $30 billion in 2022, and traders said that unless this trend reverses, the downward trend on the rupee will continue.