Amid a surge in US bond yields and the US dollar index, the rupee on Monday ended at a fresh record low of 81.62 against the greenback after depreciating to an all-time low of 81.6526 during the day. Following last week’s announcement by the UK government on tax cuts and investment incentives to boost growth, Sterling slumped as much as 4.9% against the dollar to an all-time low of $1.0327.
While the 2-year US Treasury yield was at 4.2%, its highest level since October 12, 2007, the dollar index, which measures the greenback against a basket of 6 major currencies including sterling, the euro and the yen, reached 114.58 for the first time since May 2002 before easing to 113.73.
“We expect rupee to trade on a negative note as deteriorating global risk sentiments may put downside pressure on rupee. Weak global markets may lead safe haven flows towards US dollar. However, sharp fall in crude oil prices may prevent sharp downside in rupee. Investors may remain cautious ahead of RBI’s monetary policy meeting towards the end of the month,” said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.
USDINR spot price is expected to trade in a range of 80.50 to 82.50 the in next couple of sessions.
“Hawkish Fed outlook, political instability in China and sell-off in pound after the tax cut announcement is also disturbing the overall market sentiment. This week, RBI will release its policy statement and this is likely to influence the rupee that is currently falling sharply against the US dollar,” said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services.
According to reports, the Reserve Bank of India is suspected to have sold dollars via state-run banks to avert a larger decline in the rupee.
In other forex markets, the Australian dollar slipped to $0.6487, its lowest since May 2020, the Canadian dollar reached a fresh trough at C$1.3625 per greenback, its weakest since July 2020. The euro also touched a fresh 20-year trough at $0.9528 and was last down 0.5%.
China’s offshore yuan slid to a new low of 7.1630 per dollar, its weakest since May 2020, Reuters data showed.
China’s central bank on Monday announced steps to slow the pace of the yuan’s recent depreciation by making it more expensive to bet against the currency. In Japan, where the central bank is sticking to ultra-easy policy to revive a fragile economy, authorities last week intervened in the currency market to buy yen for the first time since 1998.