The dollar continued its northward rally against a basket of currencies. The greenback’s surge came as concerns resurfaced of an expanding current account deficit, or excess of overseas payables over receivables, on the penultimate day of the month.
The rupee slid to as low as 79.06 in the over-the-counter market just after the formal end to trading Wednesday at 3.30 pm, currency dealers said. Even the Clearing Corporation of India reported trades well below the 79 mark.
“We have seen traders cutting deals at higher exchange rates just after the local market formally closed for trading on Wednesday,” said Kunal Sodhani, AVP at Shinhan Bank. “The rupee is likely to extend losses given the current circumstances.”
Through the day’s trading, the rupee dropped to 78.9850 to a dollar in the spot market, showed Bloomberg data compiled by ETIG. It lost 0.23% to close at 78.97.
“Higher oil prices, coupled with an expected impact on the current account deficit, drove the rupee to another low,” said Ashhish Vaidya, MD at DBS Bank. “Going forward, the rupee’s movement will be determined by a combination of factors: global dollar strength, oil prices and other macro variables.”
The Reserve Bank of India (RBI) was seen intervening in the currency market, dealers told ET, particularly in the closing hours of trade. It is estimated to have sold about $700 million to help arrest the rupee’s slide, dealers said.
Central bank officials could not be immediately contacted for comments.
“The rupee hit another lifetime low mirroring global dollar gains,” said B Prasanna, head of global markets,
. “However, the currency market was less volatile, unlike a day earlier, when the expiry of futures and forwards contracts weighed on the rupee. It was, presumably, a low-intensity intervention from the central bank.”
The one-month Bloomberg volatility index rose just two basis points to 5.37% Wednesday. The gauge that reflects the intensity of currency market swings on a pair of units – USD/INR in this case – had surged 44 basis points a day earlier. One basis point is 0.01%.
The US Dollar Index (DXY), which measures the unit against major world currencies, surged 2.72% since the first week of June. The rupee has now lost 5.86% to the dollar this calendar year, compared with the 5.07% erosion in the Chinese renminbi’s value.
The rupee remained one of the worst performing Asian currencies as the unit is still considered overvalued.
In just a week, Brent crude oil prices soared nearly 10% to about $119 per barrel. This has stoked concerns of a wider current account deficit, which was already at a three-year high in FY22.
“The central bank is watchful of any speculative trading bets that can aggravate the rupee’s position,” said the chief dealer at a large bank.
