The simmering geopolitical concerns in West Asia and the hardening of US Treasury yields caused the rupee to fall to an all-time closing low of 83.54 against the dollar on Tuesday. During intraday trading, the local currency fell to a record low of 83.56, but the Reserve Bank of India (RBI) probably intervened to stop the decline. It closed the day down 9 paise, or 0.10%, higher than its previous closing low of 83.45, which was set on Monday.
On Tuesday, for the third straight session, the benchmark indices Sensex and Nifty finished lower. In addition to the Nifty ending 124.6 points or 0.6% lower at 22,147.90, the Sensex dropped 456.1 points or 0.6% to close the session at 72,943.68.
Tuesday saw the rupee perform among developing market currencies with the greatest results, despite hitting an all-time low. The Taiwanese dollar dropped by 0.34%, the Japanese Yen by 0.28%, the Thai baht by 0.21%, the South Korean won by 0.76%, and the Indonesian Rupiah declined by 2.04%.
As US Treasury yields increased and geopolitical tensions continued to boil, the Asian currencies came under pressure. A major factor reducing demand for the rupee and other Asian currencies was worries that Israel would strike again at Iran for its attack over the weekend.
The strength of the US dollar relative to a basket of six other currencies is measured by the dollar index, which increased 0.13% to 106.34, the highest level in almost six months. The 10-year US yield hit 4.69%, the highest since November, as the likelihood of a sharp reduction in interest rates by the Federal Reserve waned following the country’s better-than-expected retail sales data.
According to experts, the market is reassured by the RBI’s substantial foreign exchange reserves that there won’t be any major changes in the rupee very soon. The RBI’s foreign exchange reserves increased for a seventh consecutive week, according to the most recent figures, and reached a new all-time high of $648.6 billion in the week that ended on April 5.
