The Indian rupee fell to a new low as it fell by 51 paise and was pegged at 80.38 against the US dollar in early trade on Thursday, September 21, PTI numbers showed. According to ANI, the rupee on the day opened at 80.28 against the greenback, which scaled a new peak as it tracked further strength. The new low of rupee comes against the background of the US Federal Reserve hiking its interest rates by another 75 basis points on Wednesday, and hinting at more aggressive rate hikes in the coming months to tame inflation.
At the interbank foreign exchange, the local currency was trading at 80.47 against the dollar, down 51 paise from its previous close. The rupee opened at 80.28 and touched a record low of 80.47 a dollar in initial deals.
As per Bloomberg, the rupee was quoted at 80.3725 against the greenback, after hitting a record low level of 80.4375. On Wednesday, the Indian currency closed just below the psychologically key 80-dollar mark, at 79.96 ahead of the Fed’s announcement. While the Fed hiked the rates by 75 basis points, more importantly, it hinted that more hikes were coming and that rates would stay elevated until 2024. As a result, Asian currencies opened weaker, with the Chinese yuan slipping below 7.10 to the dollar.
Meanwhile, the US dollar climbed up sharply to a new 20-year peak on the day as the rate hike spooked investors and advanced 0.88 per cent to 111.61.
“After the hawkish Fed Reserve commentary, the rupee is (set to fall)”, said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
“The intervention from the central bank will remain crucial and they are expected to be present through the day. However, they may allow a closing for the pair above 80 today,” he added.
“Given the broad dollar strength, the Reserve Bank of India too may look to revise its intervention function. We are likely to see a 80.10-80.50 range on Thursday,” IFA Global Research Academy said.
Forex traders said the strength of the American currency in the overseas market, a muted trend in domestic equities, risk-off moods and firm crude oil prices weighed on the local unit.
The Reserve Bank of India has been selling dollars to alleviate the depreciation pressure on the rupee due to the surging dollar and foreign portfolio outflows. The central bank sold a net of $19 billion from its reserves in July alone to prevent the rupee from falling much below 80.
Alongside its intervention in the spot market, the RBI’s forward dollar holdings have fallen to $22 billion from $64 billion in April.
(With PTI and Reuters inputs)