The rupee has been in a weaker position for quite some time even as it recently hit its all-time low of 78.22 against a dollar. The weakening of the rupee in the recent months has been attributed to the capital flight out of the country amid tight monetary policies across the globe, surging crude oil prices, and general dollar strength. In June so far, the domestic currency has seen high fluctuation and weakened about 40 paise.
The month of June started with the rupee getting stronger. On June 1, the domestic currency stood at 77.55 against a dollar, which got stronger to 77.37 on June 3. However, since then, the rupee has been weakening consistently with the currency touching its all-time low of 78.22 on June 13. Thereafter, the rupee has recovered a bit and has been trading sideways with volatility and currently stands at 77.97 to a dollar.
The fall in currency has been affected by the outflows of investments from India. Net outflow by foreign portfolio investors (FPIs) from equities reached Rs 1.98 lakh crore so far in 2022, as they pulled out Rs 31,430 crore in during the current month so far.
V K Vijayakumar, chief investment strategist at Geojit Financial Services, said, “Strengthening of the dollar and rising bond yields in US are the major triggers for FPI selling. Since the Fed and other central banks like Bank of England and Swiss central bank have raised rates, there is synchronised rate hikes globally, with rising yields. Money is moving from equity to bonds.”
The dollar index is high and currently hovering around the 103 level.
“On the currency front, the US dollar index jumped to fresh 2002 high close to Fed decision but witnessed mixed trade for rest of the week but still managed to end higher for the third consecutive week. The US currency turned mixed as Fed’s monetary tightening stance is countered by tightening stance of other central banks. Safe haven buying amid global growth worries is countered by increasing concerns about health of US economy,” Kotak Securities said in a note.
Rahul Kalantri, vice-president (commodities) of Mehta Equities, said the rupee showed some recovery from their lows after profit-taking in the US dollar but the sell-off in the domestic equity markets and rising inflation restricted gains of the rupee. “Indian trade deficits are also widening due to higher energy prices and pressuring a rupee.”
The rupee strengthened by 12 paise to 77.93 against the US dollar in opening trade on Monday as easing crude oil prices supported the local unit. However, unabated foreign fund outflows, a lacklustre trend in domestic equities and strong American dollar overseas restricted the gain, forex dealers said, according to PTI.
At the interbank foreign exchange, the rupee opened strong at 77.98 against the US dollar, then inched higher to quote 77.93, registering a rise of 12 paise over the last close. In the previous session, the rupee advanced 5 paise to settle at 78.05 against the US dollar.
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