Continuing its downward journey, the rupee on Wednesday fell 18 paise to close at a record low of 78.97 against the US dollar amid sustained foreign capital outflows, strong dollar and high crude oil prices. When the rupee hit the 78.98 intra-day, the RBI sold dollars to prevent further slide. With this fall, the Indian currency has declined by over six per cent since January this year. The rising inflation, prolonged Covid-19 lockdown in China, monetary tightening campaign of the key central banks and supply chain disruptions caused by the Russia-Ukraine war are clouding the outlook for global economic activity and have led to steep depreciation of the rupee against the dollar. According to Bank of America (BofA) Securities, the rupee has continued to depreciate beyond its expectation of a gradual trend weakness. “We believe the risks are still skewed towards more depreciation for the rupee as the fundamental outlook has deteriorated further primarily due to higher oil and other commodities. We have adjusted our projection higher from 79 currently to 81 per dollar for year-end 2022. We, however, see the RBI's strong reserves as a mitigating factor against tail-risks,” it said. Foreign investors have pulled out Rs 227,118 crore from India in calendar year 2022, putting pressure on the currency and the stock markets. While forex reserves have depleted by around $10 billion in June, indicating that the RBI is proactively expending reserves to stem the sharp fall in the domestic currency, India still fares well in terms of import cover and other short-term debt obligations. However, the RBI is opting for other measures too such as tightening monetary policy, which may arrest the rupee weakness, said Sugandha Sachdeva, Vice President, Religare Broking Ltd The inflation in the UK and other parts of Europe is at a multi-year high. The latest economic data from Europe indicates the growth challenges. Though the ECB has already announced its desire to bring in rate action, nothing concrete has been materialized yet. The worst loss against the US dollar was witnessed in the Japanese Yen, mainly rattled by low-interest rates, low rate of growth and a not-so-buoyant local demand. “The currency may lose more ground as growth concerns escalate and as demand remains subdued. The Yuan is weaker compared to its position about six months back,” says a Emkay Wealth Management report. Meanwhile, the benchmark Sensex fell 0.28 per cent, or 150.48 points, to 53,026.97 and the NSE Nifty Index declined by 51.10 points, or 0.32 per cent, to 15,799.10 amid selling pressure.
