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Rupee drops below 82 on recession fears, crude spike

The rupee finished at 82.32 per US dollar, down from 81.88 in the previous session. The rupee opened at 82.20 and reached a record low of 82.4250 in the session.

rupee vs dollar, rupee exchange rate, rupee value todayA person is trying to sanitize currency note using UV ray at Tung Fong restaurants, Park Street, Kolkata (Express photo by Partha Paul)

The rupee slid past 82 level to fall to a fresh record low 82.33 per US dollar on Friday as the greenback strengthened against major currencies amid risk aversion on fear of global recession and also as oil prices climbed.

The local currency ended 44 paise down today compared to previous close of 81.89 against the US dollar, dealers said. It touched an intra-day low of 82.43 and a high of 82.18 against the greenback.

Meanwhile, domestic equity markets closed flat, with the benchmark Sensex at the BSE ending down 30.81 points, or 0.5 per cent, at 58,191.29. The broader Nifty at NSE ended 17.15 points, or 0.1 per cent, to finish at 17,314.65.

Forex dealers said the rupee fell to a fresh all-time low on Friday as the dollar remained strong and also a rally in global crude oil prices weighed on the overall market sentiment.

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On Wednesday the Organization of the Petroleum Exporting Countries (OPEC) and its allies, also referred to as OPEC+, announced to cut oil production by 2 million barrels per day from November.

“Reduction in oil production will increase prices of crude oil further, which, in turn, raises concerns over inflation and rate hikes,” said Gaurang Somaiya, forex and bullion analyst, Motilal Oswal Financial Services Ltd.

Explained

Intra-day low of 82.43

The rupee ended 44 paise down compared to previous close of 81.89 against the US dollar, dealers said. It touched an intra day low of 82.43 and a high of 82.18 against the US dollar.

Market participants said the Reserve Bank of India (RBI) intervened in the spot market at 82.30-82.40 levels, which helped check the rupee fall further.

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Traders said the sentiments also turned negative after the World Bank on Thursday revised downwards the growth estimates for the South Asian region, including India.

India’s growth forecast for 2022-23 was trimmed by 100 basis points to 6.5 per cent from the June projection of 7.5 per cent. In 2021-22, the country’s GDP grew by 8.7 per cent.

Recently, the Reserve Bank of India (RBI) slashed the real gross domestic product (GDP) forecast for fiscal 2022-23 to 7 per cent from the 7.2 per cent projected in August.

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Investors also turned risk averse after a US Federal Reserve official on Thursday hinted at more rate hikes to tame inflation, forex dealers said.

Federal Open Market Committee (FOMC) Governor Lisa Cook said that inflation poses both a near-and-long term threat and it was critical to prevent an inflationary psychology from taking hold.

The rupee is expected to trade in a range of 81.80 to 82.80 against the US dollar in the short term, said Anindya Banerjee, vice president – currency derivatives and interest rate derivatives, Kotak Securities Ltd.

Meanwhile, according to AP, US employers slowed their hiring in September but still added 263,000 jobs, a solid figure that will likely keep the Federal Reserve on pace to keep raising interest rates aggressively to fight persistently high inflation.Friday’s government report showed that hiring fell from 315,000 in August to the weakest monthly gain since April 2021. The unemployment rate dropped from 3.7 per cent to 3.5 per cent, matching a half-century low. US stocks dropped sharply in early trading Friday after data showed the economy was creating jobs at a strong pace. The Dow Jones Industrial Average was down 1.69%, the S&P 500 lost 2.17% and the Nasdaq Composite declined 2.79%, as per a Reuters report. Meanwhile, oil rose about 3% to a five-week high on Friday. Brent futures rose $2.73, or 2.9 per cent, to $97.15 a barrel by 10:56 a.m. EDT (1456 GMT). US West Texas Intermediate (WTI) crude rose $2.94, or 3.3 per cent, to $91.39.

First published on: 07-10-2022 at 09:59:56 am
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