Rupee on brink of 80 per US dollar, hits record low for fifth day in a row

The US dollar has seen a rally this week as markets are expecting the US Fed to raise rates way more swiftly than its peers

The Indian rupee today weakened to 79.96 levels against US dollar. So far this year, the US dollar is up 7% against the Indian currency. The US dollar today was near 20-year highs against a basket of other major currencies. Oil prices rose today amid prospects of a less aggressive U.S. rate hike, although gains were capped by demand recovery worries. The rupee had closed at 79.87 in the previou

The major drag for the rupee continues to be the FII selling which has exceeded $30 billion so far this year though the selling has eased in recent days. 

Analysts sat that the red-hot inflation data in the US has raised the case for a full percentage point rate hike at the Fed’s meeting later this month, given the Fed chair’s stance that inflation must be brought down as quickly as possible. Data released on Wednesday showed US annual consumer prices jumped by a scorching 9.1% in June, the highest in four decades, topping expectations of an 8.8% rise. The Fed has already raised rates three times this year.

“The aggressive policy course by the US Fed to curb rising price pressures is exacerbating fears of a weakening growth outlook and leading to risk aversion in the markets. Besides, we have seen a relentless rise in the dollar index, while the euro has been hit hard as it tumbled below parity against the dollar for the first time in almost 20 years. Europe is grappling with an energy supply crunch owing to sanctions on Russia that make it more susceptible to recession risks," said Sugandha Sachdeva, Vice President - Commodity and Currency Research, Religare Broking Ltd.

“This has led to a big moment depicting strength in the greenback as markets are expecting the US Fed to raise rates way more swiftly than its peers. Going forward, it remains to be seen whether the euro can hold around the psychological parity level and regain some lost ground. All eyes would now be on the ECB meeting lined up next week and that will provide further cues about the rupee-dollar exchange rate. Considering the macroeconomic backdrop, the Indian rupee has its eyes set on the 81 to the dollar mark in the near term," she said. 
 

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