Rupee plunges 22 paise, to a low of 79.81 against the US dollar

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The rupee dropped 22 paise against the US currency to close at 79.81 on Wednesday, after the dollar soared to a twenty-year high on overseas markets. This was in response to foreign investors continuing to withdraw funds from Indian stocks.


The local currency was affected by the fear of central bank interest rate increases to contain inflation. However, the rupee was supported by oil prices that were trading at USD 100 per barrel, they said.


At the interbank forex exchange, the local unit opened strong with 79.55 against greenback. Later, it reached a high of 79.53, thanks to gains in stock market early on.


Due to a stronger US dollar, the rupee dropped in the latter part of the day and closed at 79.81. This was 22 paise less than the previous close, which was its highest closing level.


The dollar index, which measures strength of the greenback in relation to six currencies, reached a 20-year peak of 108.59


Inflation in retail stores in the US rose to 9.1 percent in June to an all-time high of 9.1 percent. Analysts predicted that this would increase pressure on the Federal Reserve to lower it with aggressive interest rate increases.


Benchmark 10-year US bonds yields rose above 3 percent, while 2-year note yields surged to a 3-week high after the inflation date.


Investors find emerging market currencies such as the rupee less attractive due to high US bond yields, which can lead to capital outflows.


“Rupee can benefit from a drop in crude oil price below USD 100/barrel, but rising inflation numbers in the evening will be a significant trigger for rupee movements against the dollar,” JateenTrivedi, VP Research Analyst, LKP Securities said.


The rupee also suffered from forex outflows to capital markets. According to exchange data on Wednesday, foreign institutional investors remained net sellers at the capital market, selling shares worth Rs 2.839.52 crore.


Domestic equity market: The BSE Sensex ended at 372.46

points or 0.69 Percent lower at 53.514.15, while NSE Nifty broader fell 91.65 Points or 0.57 Percent to 15,966.65.


Brent crude futures, the benchmark global oil price, rose 1.21 percent to USD 100.69 a barrel.


Retail inflation was slightly lower at 7.01% in June due to a slight increase in vegetable and pulse prices, but it still remained above the Reserve Bank’s comfort level for six consecutive months.


Inflation based on consumer price index (CPI), stood at 7.04 % in the previous month of May, and 6.26 % in June 2021.

(Only the headline, picture and text of this report could have been modified by Business Standard staff. All other content is auto-generated using a syndicated RSS feed.


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