The rupee hit a fresh closing low of Rs 83.27 against the dollar on Monday due to a rise in US Treasury yields and high crude oil prices, dealers said.
The previous all-time closing low was 83.21, which was on September 7.
The Reserve Bank of India (RBI) appears to have acknowledged the stress on the rupee and has permitted its gradual, albeit consistent, depreciation against the dollar, dealers said.
“The rupee depreciated because of the rise in crude oil prices and increasing US yields,” said Anindya Banerjee, vice-president, currency derivatives & interest rate derivatives, Kotak Securities.
“The RBI was there but it didn’t intervene much. It could have sold $200-300 million. From here, there is a fear of the rupee falling to an all-time low,” Banerjee said.
The rupee had hit an all-time low of Rs 83.29 on October 20 last year.
Analysts see bond yields hitting 7.5% in near-term; how should you invest?
Oil prices may remain on the boil amid strong demand, supply cuts
Rakesh Jhunjhunwala's portfolio up 11% thus far in FY24; beats markets
MCX Crude Oil may break Rs 5,000-mark; Natural Gas remains weak
Crude Oil rallies as OPEC+ cuts output; Trend reversal unlikely hint charts
India's net direct tax mop-up rises 23.5% to over Rs 8.65 trillion
Rising ownership costs to hurt commercial vehicle volume growth: Fitch
Reserve Bank of India net-purchased $3.5 bn foreign currency in July
Stabilising core inflation shows easing price pressures in economy: RBI
Rupee falls to record closing low as rising oil pushes up dollar demand
Achala Jethmalani, economist at RBL Bank, said: “A wider than anticipated trade deficit of $24 billion for August, coupled with dollar outflows from the Indian equity markets, which amounted to $700 million during September 1-14, weakened the rupee. The elevated crude oil prices are further seen to weigh on the USDINR (dollar-rupee) pair. However, the weakness is largely in sync with what is observed in the emerging markets basket. The central bank monetary policies this week and the crude price levels will influence market sentiment even as the RBI is seen intervening in foreign markets.”
Meanwhile, a segment of the market is saying the local currency did not depreciate further on the view that the dollar index might peak around 105, and the US Federal Reserve might keep the rates unchanged at its meeting.
“The rupee has gained ground, helped by the peaking of the dollar index at around 105. It was helped also by expectations that the Fed is done with the rate hikes, with interest rate futures pricing 99 per cent probability of a pause at the September 20 meeting, while there is a 70 per cent probability that the Fed will not change interest rates at the November meeting as well ... we suspect some sort of intervention this week, helping the recovery in the rupee,” said Hitesh Jain, strategist, institutional equities research, YES Securities India.
This financial year, the rupee has depreciated 1.3 per cent. It fell 7.8 per cent in the previous financial year.
The rupee depreciated 0.6 per cent this calendar year. In September it went down 0.7 per cent.
This depreciation trend has been facilitated by various factors, including foreign portfolio investors (FPIs) selling equities and increasing their holdings in dollars. Additionally, oil companies have been purchasing dollars to finance their oil imports.
The foreign exchange market will be closed on Tuesday. Market participants expect the local currency to trade in the range Rs 83-83.40 on Wednesday.
“We expect the rupee to depreciate further against the strong dollar and deteriorating global risk sentiment. Expectations that the Federal Open Market Committee may hike interest rates by 25 basis points once more in 2023 may support the greenback,” said Anuj Choudhary, research analyst at Sharekhan by BNP Paribas.