Rupee Rebounds After Hitting Fresh Low
Rupee, however, recovered to 68.94 after state-owned banks sold dollars.
The Indian rupee reversed losses after hitting a fresh low in opening trade today as state-run banks sold dollars, according to a Bloomberg report quoting two Mumbai-based traders.
The local currency rose 0.3 percent to 68.84 against the U.S. dollar after falling as much as 0.1 percent to touch a new all-time low of 69.12.
The rupee weakened along with Asian peers as China cut the yuan fixing rate by the most in more than two years. With trade tensions between the U.S. and China simmering -- and possibly providing motivation for the Asian nation to let the yuan drop further -- the volatility may continue.
“The strengthening of the U.S. dollar along with weakness in the Chinese currency are weighing on the rupee,” Viraj Desai, forex strategist, Emkay Global Financial Services, told BloombergQuint by phone. With trade tensions between the U.S. and China simmering -- and possibly providing motivation for the Asian nation to let the yuan drop further -- the volatility may continue.
The rupee has been hurt by a pick-up in oil prices, the nation’s biggest import, and a strong dollar. The currency weakened 7.4 percent so far this year, making it one of the worst performers among Asian peers.
The dollar index was at a fresh one-year high yesterday at 95.65 after Federal Reserve Chairman Jerome Powell hinted at rate hikes in future. However, the greenback pared most of the gains after President Donald Trump criticised the Fed for being “too strong”.
“The rupee could move towards 69.65 as long as we remain above 68.20,” said Desai. The Chinese yuan, crude oil rebound, and dollar Index strength remain the major catalysts, he said, adding that the RBI’s intervention and fund inflows via initial public offers could lend the much-needed support.
All eyes will now be on the yuan, said K Harihar, head of treasurer, First Rand Bank. “The two currencies have developed a correlation.”
The yuan depreciation could lead to further rupee weakness. I think 69 and above looks good for exporters. However, given strong fundamentals of the Indian economy, downside will be limited.K Harihar, Head-Treasurer, First Rand Bank
The RBI may intervene to prevent extreme volatility and will endeavor to stem appreciation or depreciation on a relative basis against its peers, according to Abhishek Goenka, founder and chief executive officer, India Forex Advisors.
For now, the currency is likely to remain in the range of 68.80-69.50, said Pramit Brahmabhatt, chief executive officer of broking firm Veracity Financial Services.