Dollar today: Mighty dollar sinks all, rupee breaches 83

MUMBAI: The rupee broke through 83 on its way to hitting a new lifetime low against the US dollar amid relentless gains in the world’s reserve currency, which hasn’t spared even its traditional proxies including the yen and pound.

The rupee slipped to a fresh low of 83.02 on Wednesday amid minimal intervention from the Reserve Bank of India (RBI). The local unit lost 0.80% against the US dollar, Bloomberg data compiled by ETIG showed.

“Global dollar strength weighed on the rupee as the central bank let it float through normal trading,” said Anindya Banerjee, currency analyst at Kotak Securities. “If the dollar index extends gains, the rupee cannot remain immune, although the local unit remains one of the best-performing currencies.”

The rupee remained Asia’s fourth-performing currency over the calendar, with the unit down 10.42%, while the Chinese renminbi fell 12.06% in value. The yen, meanwhile, has fallen to its lowest level in more than three decades.

The dollar index, which measures the unit against other major world currencies, rose more than 3% to 112.7 in the last month. International investors sought refuge in dollar-backed assets days after China gave incumbent President Xi Jinping a third term, paving the way for political continuity in the world’s second-largest economy.

“Concerns about higher-than-expected rate hikes around the world are spooking the FX market,” said Sushanta Mohanty, general manager,

. “The decline in the rupee has nothing to do with local macro parameters. With a higher current account deficit, the unit is likely to mimic the strength of the dollar.”

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Veteran fund manager Mark Mobius warned that assuming 8% inflation, US interest rates would rise to 9%. He does not expect prices to cool anytime soon.

India’s current account deficit, or excess of offshore liabilities over assets, rose to US$23.9 billion in April-June from US$13.4 billion in the previous quarter. The gauge is expected to continue to expand, raising concerns that undiminished dollar demand will put further pressure on the rupee.

According to top traders, the RBI used to protect a level of 82.40. This led to speculation in the FX market as some traders went short the dollar in anticipation of deliveries of US currency from the central bank.

“RBI pulled a surprise Wednesday that caused these traders to rush on dollars,” said the chief trader at a major Mumbai bank.

Central bank officials could not be immediately reached for comment.

Oil firms bought dollars on Friday amid fears of further market volatility.

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and () are said to have bought about $1 billion, market sources told ET. Companies could not be immediately contacted for comments.

The one-month Bloomberg Options Volatility Index rose 46 basis points to 6.85%.

“Regardless of interim interventions, the rupee will find its natural path as it also needs to adjust to global factors,” said Kunal Sodhani, vice president of Shinhan Bank.

https://economictimes.indiatimes.com/markets/forex/mighty-dollar-sinks-all-rupee-breaches-83/articleshow/94974902.cms Dollar today: Mighty dollar sinks all, rupee breaches 83

Russell Falcon

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