Rupee slides to new low of 79.60 : Dollar index hit a 52-week high of 108.56 in intra-day trade

Dollar index hit a 52-week high of 108.56 in intra-day trade

Exporters have not been able to benefit from the fall in the rupee as the slowdown in global economies because of the interest rate increases has hurt their prospects.: Representational picture

TT Special Correspondent   |   Mumbai   |   13.07.22  : The rupee plumbed new lows against the dollar on Tuesday as foreign portfolio investors (FPIs) continued to cart away dollars, with the greenback rallying against the world’s major currencies.

At the inter-bank forex market, the domestic currency ended 15 paise lower at 79.60 to the dollar after hitting a historic intra-day low of 79.66. The rupee has depreciated 6.70 per cent this year, weighed by the persistent FPI sales and the relentless surge in the dollar.

Investors are preferring safe-haven assets such as the dollar amid aggressive interest rate tightening by various central banks to fight inflation. On Tuesday, the dollar index (DXY) — which measures its strength against a basket of six currencies — hit a 52-week high of 108.56 in intra-day trade.

The DXY has gained nearly 13 per cent and its appreciation has affected both the euro and the yen. Forex circles said the Reserve Bank has not intervened aggressively and is more focused on checking the volatility of the rupee.

The RBI has announced various measures since last week to boost forex inflows and stem the rupee’s fall. In spite of the intervention, forex reserves have fallen below the $600-billion mark.

Exporters have not been able to benefit from the fall in the rupee as the slowdown in global economies because of the interest rate increases has hurt their prospects.

This is reflected in the financial results announced by IT services firms such as Tata Consultancy Services (TCS). Analysts have cautioned against signs of weakening demand because of a looming recession in some of the advanced economies.

FPIs are also likely to remain in the exit mode as they move away from risker emerging market assets. On Tuesday, the benchmark Sensex fell almost 509 points to end at 53886.61, while the broader NSE Nifty declined 157.70 points or 0.97 per cent to end at 16058.30.

Infosys was the top laggard in the Sensex pack, slipping 2.33 per cent, followed by Nestle India. Provisional data from the stock exchanges showed the FPIs sold stocks worth Rs 1,566 crore on Tuesday. In this calendar year, they have dumped stocks worth Rs 2.21 lakh crore.

The fall in the crude oil price is the only comforting factor for the domestic currency that has prevented a much bigger slide in the rupee.

The benchmark Brent crude was trading at around $100.50 per barrel on Tuesday against the previous close of $ 107.10 per barrel because of fears of falling demand on account of the recession and the reimposition of lockdowns in China.

Jateen Trivedi, VP research analyst at LKP Securities, said the US inflation numbers will be the next set of triggers for the currency market. He expects the rupee to trade between 79.55-79.85 to the dollar.

The US CPI inflation for June will be released on Wednesday and the expectation is the headline number will accelerate to around 8.8 per cent up from 8.6 per cent in the previous month, though the core inflation could soften.

An elevated inflation number could keep the US Federal Reserve on the path of aggressive rate hikes that may bring another round of softness to emerging market assets.

NRI rates raised

Days after the RBI removed curbs on foreign currency non-resident bank [FCNR(B) deposits, at least two banks have raised their interest rates.

SBI and HDFC Bank have increased their rates, their websites showed.

Other are expected to follow suit. Last week, the central bank removed the interest rate curbs on FCNR (B) deposits and also exempted the incremental deposits from cash reserve ratio (CRR) and statutory liquidity ratio (SLR)requirements.

SBI raised the interest rates on such deposits up to 105 basis points. The biggest hike was in the maturity bucket of one year to less than two years of dollar deposits, which now stands revised to 2.85 per cent from 1.80per cent earlier.

On the other hand, HDFCBank is offering an interest rate of 3.35 per cent for deposits of one year and one year to less than 2 years. According to Shyam Mani, head — SME and NRI Banking, CSB Bank, the relaxed rules will help in the reduction of cost of funds and allow banks to offer higher yields to customers.

He added that it will lead to a bigger deposit growth for the banks and that the weakened rupee will also mean more rupee per dollar for NRI customers.