The Indian rupee fell to a new record low on Monday, owing to risk aversion in equity markets and a strong U.S. dollar. Investors are apprehensive ahead of the RBI MPC meeting later this week. The native currency began at 81.52 per dollar, down from Friday’s finish of 80.99. Analysts predict that the rupee would fall as risk-off sentiment drives the dollar index to 113.70 and sterling to 105.57 against the dollar.
“The Indian rupee continued to fall as the US dollar strengthened.” The Indian rupee may fall to 81.75 against the dollar after a significant rebound in the dollar index and a broad sell-off in risk assets. In the United States, cooling FII inflows and rising government yields weigh on the domestic currency.
For the rupee, a buy-on-dips strategy is advised. Today, the dollar climbed above 114 for the first time since May 2002, propelled by a significant sell-off in the pound. “Safe haven buying in the face of a coming recession, hawkish Fed, and general risk-off sentiment also benefits the global reserve currency,” said Jigar Trivedi, Senior Analyst – Currency & Commodity, Reliance Securities.
Following a low of 81.22 in the previous session, the rupee was seen recovering to 80.77, indicating that the RBI blasted a few yards of USD. Nonetheless, it closed at 80.98 as importers scrambled to cover the USD. “With the banking system facing a liquidity imbalance of more than 21,000 crores, the RBI will have less ability to intervene and control rates and volatility.” Despite the deficit, the RBI may have utilized its reserves, as foreign exchange storage declined by $5.22 billion to $545.65 billion. The forthcoming RBI monetary policy, which is due on September 30th, will be noteworthy since the announcement on the repo rate hike, CRR drop, and changes in stance will be closely watched,” said Amit Pabari, MD, CR Forex Advisors.