Rupee Today: Indian currency weakened to about 79.43 per dollar
The rupee weakened against the rampant dollar on Wednesday, driven by an ugly sell-off in global financial markets following a significant increase in bets of a more Federal Reserve policy path as a result of red-hot US inflation data.
But the currency recovered some lost ground to end at 79.4288, after falling to a low of 79.6075, compared to its previous close of 79.1475, according to Bloomberg.Â
PTI reported that the rupee fell 28 paise to provisionally close at 79.45 against the US dollar.
âUSDINR spot closed 79.44…due to strong rally in the US dollar Index and sell-off in equities. However, RBI intervention and FPI flows may have capped the advance beyond 79.60. The sharp drop in the forward premium could be a sign of RBI selling in forwards,” said Anindya Banerjee, Vice President for Currency Derivatives and Interest Rate Derivatives at Kotak Securities.Â
After hotter-than-expected US inflation reading, the money markets fully anticipate an interest rate increase of at least 75 basis points (bps) at the Fed policy meeting next week, with a 38 per cent possibility of a full percentage point increase to the Fed funds target rate.
Before Tuesday’s US inflation data, there was no chance of a 100 bps increase.
That outlook on Fed rates pushed US Treasury rates to rise, with the two-year yield reaching a new 15-year high in London trade at 3.804 per cent.
The outlook for further aggressive rate hikes has boosted the dollar, causing angst among major central banks that have seen their currencies weaken as this fuels imported inflation.
But the yen jumped over 1 per cent against the king dollar as Japan gave its strongest signal yet that it could intervene to shore up the battered currency.
The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a yen selloff and rapid capital outflows.
“Verbal jawboning may help to slow the pace of yen depreciation but is not likely to alter the trend unless USD and UST yields decisively turn lower or BoJ changes or tweaks its policy,” Christopher Wong, Currency Strategist at OCBC, told Reuters.
