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Rupee has slipped to record lows in seven of the last 10 sessions, including Friday | Representative Picture
The Indian rupee slipped to a record low on Friday, as local stocks declined tracking a global equity sell-off caused by concerns of a slowdown in the United States and rising geopolitical tensions in the Middle East.
The rupee closed down 0.04 per cent at 83.75 against the U.S. dollar on Friday, its weakest closing level, after hitting an all-time low of 83.7525 earlier in the session. The currency was nearly flat week-on-week.
The Reserve Bank of India likely sold dollars via state-run banks to prevent a sharper decline, traders said, as the rupee was pressured by likely outflows from local equities.
India’s equity benchmarks, the BSE Sensex and Nifty 50, ended the day down more than 1 per cent each. [.BO]
Investor sentiment soured after weaker-than-expected U.S. factory data prompted growth concerns while tensions about a widening conflict in the Middle East weighed.
Futures indicated that the S&P 500 would open more than 1 per cent lower after declining in the previous session. [.N]
The rupee is expected to continue depreciating gradually and trade in a 83.57-83.77 range with RBI interventions limiting volatility, said Dilip Parmar, a foreign exchange research analyst at HDFC Securities.
The dollar index was down over 0.2 per cent at 104.1 while most Asian currencies gained between 0.1 per cent to 1.6 per cent.
The rupee has weakened about 0.7 per cent since the surprise outcome of India’s elections on June 4, even though equity and debt markets have drawn more than $10 billion in inflows on expectations of economic growth and lower fiscal deficit.
It has slipped to record lows in seven of the last 10 sessions, including Friday.
The RBI has chosen to buy dollars from the market to prevent an appreciation in the rupee, which traders believe is to correct an overvaluation of the currency’s real effective exchange rate.
The central bank “may want to avoid a loss of competitiveness by buying USD to prevent undue strength in the INR, especially as India attempts to move its economy up the value chain”, Barclays Bank said in a note.
The country’s foreign exchange reserves rose by $15 billion to a record high of $670.8 billion between the weeks ending June 7 and July 19.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Aug 02 2024 | 11:09 PM IST
