The rupee hut a new record low of 82.95 against the dollar on Wednesday, reversing gains from earlier in the session on more indications that high inflation will keep major central banks in rate-hike mode, hurting the recent risk-assets rally.
Bloomberg showed the rupee closed at its weakest level of 82.8938 per dollar after opening at 82.3062, compared to its previous close of 82.36. The domestic currency fell to a new intra-day record low level of 82.9450 against the greenback in a volatile trading session on Wednesday.
“With possibly the Reserve Bank of India buying dollars in currency futures yesterday indicating of things to come it was only time when 82.40 would have been breached. So no level seems to be sacrosant for the rupee and therefore 83.50 should be the next target once 83.00 is breached,” said Anil Kumar Bhansali Head of Treasury at Finrex Treasury Advisors.
Traders from two private banks told Reuters that two public sector enterprises had made a significant demand for dollars, which contributed to the rupee’s decline to a record low.
The rupee had attempted to strengthen to the 82-mark at one point on Tuesday before ending the day at 82.36, with a fag-end sell-off pushing the domestic currency to close nearly flat.
“The session yesterday (Tuesday) was one more indication that the bias on the rupee is to the downside,” a trader at a Mumbai-based bank told Reuters.
The trader said that for a “sustainable and decent recovery” in the rupee, there would “need to be reasonable certainty” that US yields had topped out.
According to some bankers Reuters spoke with, the rupee’s slide back from the 82-level on Tuesday was caused by demand for dollars from importers like oil corporations.
In contrast, two others claimed it was probably because the RBI purchased USD/INR contracts before their expiration on Friday.
The domestic currency hit a new all-time low of 82.9450 after risk assets reversed recent gains and fell as data revealed that skyrocketing food costs had sent British inflation back to a 40-year high of 10.1 per cent, piling pressure on the Bank of England to hike rates aggressively.
On Wednesday, global stocks, which have risen in recent sessions, were slightly lower as investors’ sentiment was conflicted between positive corporate earnings results and fears of persistently high inflation leading to more aggressive policy tightening.