The rupee on Tuesday weakened to 80 per US dollar for the first time in history before recovering ground as banks sold the greenback on behalf of exporters, dealers said.
The rupee weakened to a low of 80.05 against the US dollar in opening trade and was last at 79.95. It closed at 79.98 on Monday.
Dealers said they had not seen the Reserve Bank of India (RBI) making heavy market interventions, but it is likely to sell dollars if the rupee weakened well past 80.10.
“RBI would be a decisive factor in navigating the rupee after opening say rupee touches the crucial 80 mark. Exporters can consider hedging long-term exposures around current levels and beyond in a phased manner,” said Mecklai Financial Services in a note.
Importers and overseas borrowers were said to be making a beeline to purchase the greenback amid the near-term uncertainty surrounding the rupee’s trajectory. “Panic buying by importers would take the rupee close to 80.20 to 80.30 levels if RBI fails to protect the pair in the initial trading hours…the intraday range could be between 79.80 to 80.30 levels,” CR Forex Advisors wrote.
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While unabated outflows of overseas investment and mounting concerns over India’s current account deficit kept the overall sentiment for the rupee weak, a decline in the US dollar index on Tuesday provided some support to the domestic currency, dealers said.
After climbing to fresh 20-year highs earlier this month, the US dollar index retraced this week as Federal Reserve officials indicated that the central bank was leaning towards a 75-basis-point rate hike in July as against expectations of a 100 bps rise.
The dollar index, which measures the US currency against six major currencies, was last at 107.49 as against 108.06 at the end of last week.
Speculation about the European Central Bank raising interest rates for the first time in 11 years also dragged the dollar index lower and provided the euro a boost.