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Rupee drops by 22 paise to new low of 79.81 against US dollar

The rupee declined by 22 paise to close at a record low of 79.81 against the US currency on Wednesday after the dollar surged to a 20-year high in overseas markets and foreign investors continued to withdraw funds from Indian stocks.

Fears of aggressive interest rate hikes by central banks to rein in surging inflation weighed on the local unit, forex dealers said. Crude oil prices trading near USD 100 per barrel level, however, supported the rupee, they added.

At the interbank forex market, the local unit opened strong at 79.55 against the greenback and later touched a high of 79.53 amid early gains in stock markets.

The rupee slid in the latter half due to a stronger dollar and closed at the day’s low of 79.81, down by 22 paise over the previous close of 79.59, which was all-time closing low.

The dollar index, which measures the greenback’s strength against a basket of six currencies, advanced to a 20-year high of 108.59.

Retail inflation in the US surged to a four-decade high of 9.1 per cent in June, which analysts said would put pressure on the Federal Reserve to bring it down with aggressive interest rate hikes.

Benchmark 10-year US bond yields rose above the 3 per cent mark while two-year note yields raced to a three-week high after the inflation date.

High US bond yields make emerging market currencies like the rupee less appealing to investors, leading to capital outflows.

“Crude price falling below USD 100 per barrel can be a positive trigger for rupee but inflation numbers in the evening from the US shall give a major trigger to rupee movement against the dollar,” Jateen Trivedi, VP Research Analyst at LKP Securities, said.

Forex outflows from capital markets also weighed on the rupee. Foreign institutional investors remained net sellers in the capital market on Wednesday, offloading shares worth Rs 2,839.52 crore, as per exchange data.

On the domestic equity market front, the BSE Sensex ended 372.46

points or 0.69 per cent lower at 53,514.15, while the broader NSE Nifty fell 91.65 points or 0.57 per cent to 15,966.65.

Meanwhile, Brent crude futures, the global oil benchmark, rose 1.21 per cent to USD 100.69 per barrel.

Retail inflation dropped marginally to 7.01 per cent in June mainly due to a slight easing in prices of vegetables and pulses, though it remained above the Reserve Bank’s comfort level for the sixth month in a row.

The consumer price index (CPI) based inflation stood at 7.04 per cent in the preceding month of May and 6.26 per cent in June 2021.

(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.)



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