The rupee closed at a fresh low against the dollar for the third straight day due to a rebound in crude prices and as a global wave of risk aversion led to capital flowing out of emerging markets to the safety of the greenback.
The domestic currency settled at 79.64 to the dollar on Wednesday as against 79.60 at the previous close. In the course of trade, the rupee touched a lifetime intra-day low of 79.68 to the greenback.
The rupee has already lost 0.5 per cent to the dollar this week, taking the depreciation for 2022 so far to 6.7 per cent. In the calendar year so far, the dollar index has strengthened 13 per cent, with the gauge hovering around 20-year highs on Wednesday.
Concerns of a slowdown in global economic growth amid the protracted war in Ukraine and the Federal Reserve’s aggressive monetary tightening plans have sent investors rushing to the safety of the US dollar.
Foreign portfolio investors have pulled out a massive $30.4 billion from Indian assets so far in 2022, with the bulk of outflows from equities, NSDL data showed. During the global financial crisis of 2008 overseas investors had net sold $9.3 billion in the whole of that year.
Also Read: Rupee drops to new low of 79.62 against USD amid domestic equities’ losses
“Recovery in crude oil prices, stronger dollar index and weaker domestic equities due to foreign fund outflows weighed on the rupee even after multiple measures taken by the central bank and the government,” HDFC Securities Research Analyst Dilip Parmar told Business Standard.
Crude prices edged up on Wednesday after dropping below $100 a barrel for the first time since April in the previous day’s trade.
Brent crude futures gained 0.7 per cent to trade at $100.22 a barrel at around 1:45 pm IST, Reuters reported. Rising crude exerts upward pressure on India’s trade deficit and inflation, given the country’s huge dependence on fuel imports.
Dealers said interventions in the form of dollar sales by RBI had arrested the rupee’s weakness on Wednesday, even as the domestic currency marked a fresh closing low.
“The RBI was there at around 79.63-79.64/$1. Also, traders were wary of being too aggressive on the dollar before the release of US inflation. If the data shows a moderation (in inflation) the dollar index could weaken,” a dealer with a state-owned bank said.
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