After hitting a fresh record low of 73.81, rupee recovers to 73.74 levels

The domestic currency on Wednesday closed at a record low of 73.34, down by 43 paise or 0.59 per cent at the interbank foreign exchange.

After plunging to a fresh record low of 73.81, the domestic currency recovered 7 paise later in the day to trade at 73.74 against the US dollar.

Earlier, in the day the domestic unit
slipped past the crucial 73.50 levels to open at 73.70 against the US dollar. 

The domestic currency on Wednesday plunged by 43 paise to breach the historic low of 73 level as soaring crude oil prices fuelled worries over capital outflows and widening current account deficit. The domestic currency closed at a record low of 73.34, down by 43 paise or 0.59 per cent at the interbank foreign exchange.

Sharp volatility in the domestic equities and steep FIIs outflows from equity and debt segments keeping sentiments bearish for the rupee, said Rushabh Maru - Research Analyst , Anand Rathi Shares and Stock Brokers. "The dollar index is hovering around multi-months high as the Federal Reserve continues to raise interest rates aggressively. Focus would now shift to the RBI monetary policy meeting. There is a buzz of repo rate hike by 25 bps and possible change in the monetary policy stance by the RBI. More importantly, its guidance will be crucial. Market will also keenly watch whether the RBI announces any crucial measures to stabilize the rupee. In the near term, the rupee might trade in 72.50 and 73.80 range," Maru added. 

On the global front, the dollar climbed an 11-month top on the yen on Thursday as stunningly strong US economic data drove Treasury yields to their highest since mid-2011, while Japanese stocks attempted to re-claim a 27-year peak.

"A clear hint that Fed is all set to tighten monetary policy much further, hurting money flow into EMS. Market may begin to pencil in five more hikes by the end of 2019, instead of four more hikes. US yield curve has bear steepened slightly overnight. As long as the US economy continues to outperform emerging economies and as long as US stock market continues to outperform EM equities, fund flow would continue to hurt EM currencies like Rupee. In a way, the logic is circular to some extent, as long as fund flow continues from row into US financial markets, US equities will outperform. However, the outperformance is also attracting further inflows in a reflexive manner. Therefore, as long as the flows do not reverse, there is not point being bearish on dollar against USDINR," said Kotak Securities in its daily currency report.