According to statistics provided by the ministry of commerce and industry on Thursday, wholesale price index (WPI)-based inflation decreased to 15.18 per cent in June from 15.88 per cent the previous month. The country's current account deficit and forex outflows have weighed on inflation, making the most significant effects of a falling rupee. Since India imports, more than 80% of its crude oil, the price of oil has been circling at about $100 per barrel. The rupee began the day strongly and reached a high of 79.71 to the dollar in early trade, however US inflation numbers may put more pressure on the rupee. At its lowest point of the day, the rupee eventually settled at 79.9975 to the dollar, losing 18 paise from its previous closing of 79.81.
"The Indian rupee becomes the median performer among the regional currencies. The rupee closed at a record low for the fourth day in a row amid safe-haven demand for the dollar after US inflation surged to a 41-year high. The rate markets now are pricing aggressive rate hikes from Federal Reserve which supported the dollar," Dilip Parmar, Research Analyst, HDFC Securities, said.
Spot USD/INR delayed the level 80 in today's session but is expected to break in the coming days. The pair has resistance at 80.90 after crossing 80 while the support shifted to 78.80 from 78.50, he noted.
“Rupee continued to remain under pressure as the dollar rose sharply against its major crosses. Today it fell to fresh all-time lows against the US dollar. Market participants remained cautious ahead of the (US) inflation number that was released yesterday. Data showed year-on-year consumer price growth accelerated to a scorching 9.1 per cent," Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, said.
This fuelled speculation that the Federal Reserve will raise interest rates even more than the 75 basis points previously expected. We expect the USD/INR (spot) to trade with a positive bias and quote in the range of 79.40 and 80.00 in the short term, he added.
"The aggressive policy course by the US Fed to curb rising price pressures is exacerbating fears of a weakening growth outlook and leading to risk aversion in the markets," Sugandha Sachdeva, Vice President - Commodity and Currency Research, Religare Broking Ltd said.
"Besides, we have seen a relentless rise in the dollar index, while the euro has been hit hard as it tumbled below parity against the dollar for the first time in almost 20 years. Europe is grappling with an energy supply crunch owing to sanctions on Russia that make it more susceptible to recession risks.
"This has led to a big moment depicting strength in the greenback as markets are expecting the US Fed to raise rates way more swiftly than its peers," Sachdeva said.
The dollar index, which measures the dollar's value against a portfolio of foreign currencies, traded 0.55 per cent higher at 108.55 and fluctuated between Rs. 108.14 and 109.29 during the day.
(With inputs from PTI)
