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Rupee hits fresh low of 79.64/$ at close as FIIs continue to exit

MUMBAI: The rupee weakened by four paise to close at a new low of 79. 63 in the foreign exchange market on Wednesday. The currency opened strong at 79. 55. Dealers said that June inflation numbers coming in at 7. 01%, which was better than expected, was a positive. However, foreign institutional investors (FIIs) continued selling in equity markets ahead of US inflation data, which led to the rupee weakening to a low of 79. 68. The domestic unit recovered to close at 79. 64.
The US greenback continued to gain ground in international markets against other currencies, with the dollar index advancing to 108. 17. Oil prices also increased, with Brent crude trading at $100. 7 per barrel. The sensex closed 372 points lower at 53,514. The sentiment was weak in the equity market, with IT companies like TCS and HCL missing their profit estimates. The euro slipped below the dollar for the first time in two decades in international markets.
The currency has fallen by nearly 12% in 2022. With the slide unlikely to stop, inflation is expected to gather pace in the eurozone as most of the imports are paid in dollars. This could lead to further rate hikes by the European Central Bank slowing regional growth.
“The RBI has also been actively intervening in both spot and forwards market to ensure orderly depreciation of the rupee. The natural fear is: ‘Can the RBI resort to a rate defence a la 2013?’,” said Aastha Gudwani, India economist with Bank of America Global Research, in a report. She added that currently, the inflation trajectory looks to be well in line with the RBI’s forecast of 6. 7% yearon-year, thereby limiting the case for continued aggressive rate hikes. “We see the RBI raising rates by 75bp by December,” the report said.



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