Rupee weakens above 79.60 per dollar
The rupee weakened sharply early Thursday, followed by a sell-off of risky assets and as the dollar took the lead, a day after minutes of the Federal Reserve meeting in July indicated that interest rates would remain higher for longer as the dollar took the lead. to lower inflation.
In interbank currencies, the rupee opened at 79.60 and then fell to 79.68, down 23 paise during its latest close, according to PTI.
On Wednesday, the rupee gained 29 paise to settle at 79.45 against the dollar.
Indian stock benchmarks started trailing on Thursday, making a long streak of gains after gloomy global signals pointed to increased risk in trades.
But the rupee’s losses were mitigated by a decline in global crude oil prices.
Oil prices fell on Thursday and reversed from the previous session as rising production from Russia and concerns about a possible global recession weighed on futures.
Brent oil futures fell 33 cents or 0.4 percent to $93.32 a barrel. U.S. crude oil futures fell 40 cents, or 0.5 percent, to $87.71 a barrel.
Prices rose more than 1 percent during the previous session, although Brent hit its lowest level since February.
Futures have fallen in recent months as investors delved into economic data that has raised concerns about a potential recession that could hurt energy demand.
“A higher dollar index is offset by lower oil prices that keep the rupee in a narrow range, while India’s 10-year bond yields have risen as oil prices fall,” Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors, told PTI.
The rupee’s upside potential is likely to be limited, thanks to the “dollar demand wall on dips (on USD/INR),” a trader at a private sector bank told Reuters. He pointed out that the dollar has received “very good support” this week at the 79.20-79.30 level.
Potential dollar outflows related to a private equity deal announced earlier this week will be followed by traders.
The dollar rose 0.6 percent against the yen overnight, holding steady at 134.90 yen on Thursday. The euro bought up $1,0184. The US dollar index remained stable at 106.570.
The greenback won the most against the Antipodeans, especially the Aussie. The New Zealand dollar also fell, losing nearly 1 percent to avert a first jump after the central bank raised interest rates and steepened its expected price appreciation path.
Against the yen and sterling, the greenback rose and remained stable against the euro.
“The bigger picture for the dollar is that it is in a strong uptrend,” said Matt Simpson, senior analyst at Brisbane brokerage City Index, adding that it has now paused a week-long decline.
“In some ways, bulls want to back off and I think the Fed minutes have given them a reason to do that.”
Federal Reserve officials saw “little evidence” late last month that inflationary pressures in the US were easing, the minutes showed. The minutes signaled a possible slowdown in the pace of gains, but not a switch to 2023 austerity measures that traders had priced into interest rate futures until recently.
“Once a sufficiently restrictive level is reached, they will continue to do so for a while,” Rabobank strategist Philip Marey said in a letter to customers.
“This is clearly in contrast to the early pivot of the Fed that the markets have priced into.”
Traders predict that there is a 36 percent chance that the Fed will raise interest rates by 75 basis points for the third time in a row in September. They also forecast that rates will peak at around 3.7 percent in March and remain there through the end of 2023.
Sterling also fell overnight after double-digit inflation concentrated investor concerns about recession risk.
British consumer price inflation rose to 10.1 percent in July, the highest since February 1982, official figures showed, and after a brief spike, the British pound fell 0.4 percent to $1.2050.
