The rupee on opening trade Thursday depreciated to near a 10-month intraday low against the US dollar due to surging US Treasury yields, global risk aversion and geopolitical unrest, said dealers.
At 11 am, the rupee appreciated to 83.09 against the US dollar.
In the offshore market, the Indian unit touched 83.45 per US dollar levels as investors continued back the greenback due to the rising US 10-year treasury yield. The Reserve Bank of India (RBI) intervened by selling dollars to limit the upside.
“The RBI previously used ‘Brahmastra’ by doing sell-buy FX swaps (selling US dollar on the spot and buying the same at future maturity) to protect the rupee from steep depreciation. Last year, when the Russia-Ukraine war had begun, rupee was seen depreciating beyond 75.50-76 levels (Rs 83.75-83.76 per US dollar). That time they had done ($5+$5=$10 billion) in March and April 2022 after which the rupee was seen appreciating. There is a higher probability that this time they can deploy sell-buy forex swaps. Moreover, FII inflows are still positive for August, which shows the local currency has scope to arrest the fall,” said Amit Pabari, managing director at CR Forex.
Domestic fundamentals are strong but external factors continue to pressure the rupee. Minutes of the US Federal Reserve’s meeting were on the hawkish side and led to the rise in US Treasury yields. Moreover, Chinese real estate developer Country Garden has defaulted on two types of dollar bond payments which rattled the financial markets.
“The rupee might continue to trade weaker, dragged down by peer Asian currencies. Today’s range will be between Rs 82.90 and Rs 83.20 per US dollar. Exporters should increase their hedges in a staggered way at current levels (Rs 83.07 a dollar) and importers can hold on with a stop loss of Rs 82.30 a dollar, however, any dip below Rs 82.80 a dollar should be used to clear their immediate imports,” said Ritesh Bhansali, vice-president at Mecklai Financial Services.
First Published: Aug 17 2023 | 11:43 AM IST