The Indian rupee plunged to a new lifetime low on Tuesday amid unabated outflow of foreign funds from the domestic market and rising global crude oil prices. The currency slumped to a record low of 78.51 (provisional) against the US dollar during the early trading on June 28. Fear of a global recession, strengthening dollar, continuing foreign fund outflows have kept the domestic currency under pressure for the last few weeks now.
Oil prices jumped nearly 1 per cent in early Asian trade after the United Arab Emirates’ energy minister had mentioned the nation was producing near its maximum capacity. US West Texas Intermediate (WTI) crude futures climbed $1.07, or 1 per cent, to $110.64 a barrel at 0028 GMT. Brent crude futures jumped $1.08, or 0.9 per cent, to $116.17 a barrel.
The US dollar index, which measures the currency against six major currencies, witnessed a volatile session on Monday amid weak economic data. The index tumbled to close at 103.707 on June 27. Benchmark US 10-year Treasury yields steadied after gains in the previous session.
US economy data on Monday surprised the market as the new orders for durable goods and pending home sales had beaten the expectations. The better-than-expected economic data triggered profit taking in the dollar.
Foreign investors pulled out close to Rs 46,000 crore so far this month. The net outflow by foreign portfolio investors (FPIs) from equities reached Rs 2.13 lakh crore until now in 2022, showed data.
Explaining the reason behind depreciating rupee, Rahul Kalantri, VP commodities, Mehta Equities Ltd said, “The rupee extended its fall on Monday despite weakness in the dollar index. Rebound in the crude oil prices and talks of more economic sanctions on Russia pushed the currency lower. Persistent selling by foreign institutional investors in the domestic markets is also putting pressure on the domestic currency.”
Rupee Future: What’s Next?
“Indian Rupee is expected to open weaker against the dollar this Tuesday tracking weak Asian and emerging market currencies and weak equity markets. However, depreciation bias could be capped as the dollar remains under pressure amid speculation that the the US Federal Reserve may go easy on the rate hike path as inflation may moderate. Range for the Rupee today is 78.17-78.58,” said Sriram Iyer, senior research Analyst at Reliance Securities. “Range for the dollar index this is $103.67-$104.21,” he added.
“We expect the rupee to depreciate further in the coming week till 78.80 amid persistent foreign funds outflows. However, investors will remain vigilant ahead of major economic events from the United States like conference board consumer confidence, GDP and personal income monthly data,” said ICICI Direct in a note.
“Further economic sanctions on Russia may drive global energy prices higher and put pressure on emerging market currencies. We expect the rupee to remain volatile this week and could cross 78.55 levels,” Kalantri mentioned. “We expect the dollar index to remain volatile this week and expect to trade in the range of 103.20-104.70,” he further added.
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