Rupee spirals to fresh low

On the domestic front, India’s trade deficit has swelled to a record high of $25.63 billion in June amid high commodity prices, leading to a rise in the import bills.

“The rupee is expected to trade on a negative note on a firm tone in the US Dollar, elevated oil prices, and weak global market sentiments,” said a dealer. (Photo: Pixabay)

Continuing its downward journey, the rupee on Tuesday fell by 41 paise to close at a new low of 79.37 against the US dollar as a strong greenback overseas and sustained foreign fund outflows hit the forex market sentiment.

The rupee slumped to a new record low of 79.37 mark against the dollar on the back of a rise in the dollar index towards a new two-decade peak. Besides, heavy portfolio outflows, soaring crude oil prices and a rising interest rate regime of the major central banks have been the key catalysts behind this recent bout of weakness in the rupee-dollar exchange rate.

On the domestic front, India’s trade deficit has swelled to a record high of $25.63 billion in June amid high commodity prices, leading to a rise in the import bills. Besides, the current account deficit is expected to widen to around 2.9 per cent of GDP in FY23 as against 1.2 per cent in FY22, which is weighing on the domestic currency. The rise in the deficit is on account of a steep increase in gold and crude oil imports, according to preliminary data released on Monday.

On the domestic equity market front, the BSE Sensex, which fell 731 points from the day’s high, ended 100.42 points or 0.19 per cent lower at 53,134.35, while the broader NSE Nifty declined 24.50 points or 0.15 per cent to 15,810.85.

“The rupee is expected to trade on a negative note on a firm tone in the US Dollar, elevated oil prices, and weak global market sentiments,” said a dealer. The dollar may strengthen on expectations of aggressive rate hikes by the US Federal Reserve. The hike in import duty on gold may support the rupee to some extent as it may dent import demand for gold.

The dollar index, which measures the greenback’s strength against a basket of six currencies, was up 0.89 per cent at 106.07.

Foreign institutional investors remained net sellers in the capital market on Monday as they offloaded shares worth Rs 2,149.56 crore, as per exchange data. “Moving ahead, we foresee the Indian rupee heading lower towards the 80-81 zone against the dollar, though the RBI is expected to proactively intervene in the markets to curb the pace of decline in the domestic currency,” said Sugandha Sachdeva, VP-commodity and currency Research, Religare Broking Ltd.