Rupee at new low of 79.65 a dollar, inches closer to 80

The Indian rupee declined to a new all-time low of 79.65 per U.S. dollar amid the safe-haven greenback strengthening to a two-decade high and global recession fears. This is the new lifetime low for the domestic currency that has been in a freefall for the past few months. Persistent FII outflow and high crude oil prices also kept the local unit under pressure.

Earlier reports showed that the Indian rupee opened lower at 79.55 per dollar on Tuesday, before slipping 13 paise more to 79.58. In initial trade today, the rupee was changing hands at a high of 79.55 and a low of 79.62 against the U.S. dollar. Rupee had closed at a fresh low of 79.45 per dollar on Monday, slipping 19 paise after settlements.

“Dollar index rallied as demand for safe haven increased on worries about slowing global economic growth. Further, the dollar edged higher weak global market sentiments and hawkish FOMC meeting minutes and statements from Fed officials,” comments ICICI Securities.

The dollar index, which measures the currency’s strength against a basket of six other currencies, continued to rise on Tuesday, reaching 108.48 by 3:24 am after moderating from 108.56.

In its weekly market outlook, ICICI Securities had projected rupee to depreciate further to 79.80 against dollar during the week amid strong dollar, bounce back in crude oil prices and consistent FII outflows. Central banks’ attempts to rein in inflation by raising interest rates may push economies into recession, hurting investor sentiments.

Widening of the current account deficit is also likely to hurt the rupee. Earlier this week, Nomura had projected India’s current account deficit to further widen to 3.3% in the current financial year from 1.2% in FY22. The latest measures taken by the government on curbing gold imports by raising the import tax to 15% and export tax on petroleum products may not help in reining in the widening trade gap, the brokerage had added.

Traders are expected to monitor major economic data, including retail inflation figures from India on Tuesday and consumer price index from the U.S. on Wednesday, to gauge economic health of the countries.

Meanwhile, the Reserve Bank of India (RBI) has decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/imports in the Indian rupee. This is being done to promote growth of global trade with emphasis on exports from India and to support the increasing interest of the global trading community in the rupee, the central bank had said.