Rupee closes at a new low on US rate worries
rupee on Wednesday closed at a new low versus the US dollar as risk aversion ahead of the Federal Reserve's statement, overseas investment outflows from Indian equities and dollar demand from oil importers exerted pressure on the local currency.
The rupee settled at 83.29 per US dollar on Wednesday, a new record closing low. The local unit had settled at 83.25 per US dollar on Tuesday.
So far in 2023, the rupee has depreciated 0.7% versus the US dollar. The rupee's previous record closing low was 83.28 per US dollar.
Currency traders predicted more weakness for the rupee in the coming days. «The Indian rupee hit a record low at a close.
The weaker PMI numbers, slower eight core infra data and foreign fund outflows weighed on the local rupee ahead of the FOMC decision,» Dilip Parmar, research analyst at HDFC Securities said. «Spot USD-INR is expected to head towards 83.50 as a hurdle of 83.30 is likely to cross tomorrow looking at the post-market price action in the derivative and forward markets. In the near term, 83/$1 will act as strong support,» he said.
Higher US interest rates and bond yields typically lead to global capital flowing out of emerging markets and heading towards the world's largest economy.
This leads to weakness in emerging market currencies. The Fed has raised interest rates by 525 basis points since March 2022 to bring down high inflation in the US.
The dollar index, which measures the US currency against six major global peers, strengthened to a high of 106.89 during Indian trading hours on Wednesday. Two months ago, the index was trading at 103.60.
Foreign portfolio investors have sold $1.8 and $3.0 billion worth of Indian equities in September and October, respectively, official data showed.
