During a widespread US dollar surge today, the rupee hit a new historical low of 79.66 against the US dollar. The dollar index, which compares the value of the dollar to a basket of six other currencies, climbed to 108.3, its highest level since October 2002.
The rise in the dollar index is mostly due to the Euro’s weakening, with investors being drawn to the US dollar as a haven amid concerns about other economies’ growth. The rupee lost 15 paise to settle at a new record low of 79.60 as the benchmark Sensex index of domestic equities lost roughly 500 points. Amid worries that an energy crisis could send Europe into a recession, the euro was hovering close to a 20-year low and was nearly equal to the dollar. According to Rahul Kalantri, VP Commodities at Mehta Equities Ltd., the widening trade imbalance, shrinking foreign exchange reserves, and rising global energy prices are all contributing to the rupee’s depreciation.
This week, the rupee is anticipated to attempt the levels of 79.80 and 80.05. This week, currency traders will be concentrating on US inflation statistics and Federal Reserve officials’ comments toto find hints about the outcome of the Fed’s upcoming policy meeting. A high inflation reading would increase the pressure on the Fed to hike interest rates more quickly. The rising trade deficit has put pressure on the value of the Indian rupee. India’s trade imbalance increased to $25.63 billion in June, according to information recently issued by the Ministry of Commerce and Industry. Due to heavy imports, the trade deficit for the first three months of the current fiscal year increased to $70.25 billion.
Fears about economic growth were also hurting oil prices. To $106.04 per barrel, Brent crude decreased. Even while the selling of Indian stocks by FIIs has decreased somewhat recently, they are still net sellers. They sold Indian stocks on Monday for a net amount of 170 crores. As the global trade community’s interest in the local currency grows, the Reserve Bank of India, or RBI, instructed banks to set up additional provisions for export and import transactions in Indian rupees on Monday. However, banks will need prior authorization from the Reserve Bank of India’s (RBI) Foreign Exchange Department, the central bank announced in a circular.
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