Rupee little changed versus a stronger dollar
The rupee held its ground on Monday against a firmer dollar as investors eyed a possible jumbo-sized Federal Reserve rate hike this week, which led to a sell-off in global risk assets.
Bloomberg had the rupee last changing hands at 79.7725 per dollar, compared to its Friday’s close of 79.7450, with the domestic currency trading between 79.5862 and 79.7725 range.
PTI reported that the rupee provisionally settled 2 paise lower at 79.80 against the US dollar.
The Reserve Bank of India has burnt through the country’s forex reserves to shore up the rupee and limit wild swings in the currency.
India’s forex reserves have nosedived over $80 billion since Russia invaded Ukraine late in February, with a Reuters report showing the RBI has spent from the reserves at a faster pace than it did during the 2013 taper tantrum.
With markets fully priced for a rise in interest rates of 75 basis points from the Federal Reserve, and the futures showing a 20 per cent chance of a full percentage point, the dollar index, which compares the greenback’s performance with six other major currencies, rose 0.4 per cent to 110.03.
“We expect the USD to keep trending higher this week to a new cyclical high above 110.8 points because of the deteriorating outlook for the world economy,” said CBA Analysts in a note, according to a Reuters report.
Along with the weak regional currencies, the rupee depreciated against the US dollar for the fourth day in a row. However, the momentum remained lacklustre in the rupee as the economy is better placed among Asian countries.
Last week, the World Bank and the International Monetary Fund warned of rising risks to the global economy from the broadest interest rate hikes in many decades.
Not just the US Fed, most other major central banks – from Switzerland to South Africa – meeting this week were poised to take rates higher.
The dollar’s ascent kept the euro down at 0.9978 and the British pound at $1.1390, just off Friday’s 37-year low.
