Rupee below 79 a dollar as softer Fed hike view pulls down greenback
The rupee hit a one-month high on Tuesday, trading below 79 against the dollar as weakness in the greenback globally and a slide in crude oil prices bolstered appetite for emerging market currencies.
At 11.45am IST, the rupee was trading at 78.60 per dollar compared to 79.03 at previous close Monday.
The US dollar index, a measure of the currency against six major rival pairs, was at 105.22 as against 105.41 around 3:30 pm IST on Monday.
Speculation that the US Federal Reserve slowing down the pace of its rate hikes has led to a significant drop in the global strength of the greenback. The index had climbed to a 20-year high of 108.54 in late July.
A slower pace of US rate hikes and a softer dollar increases the appeal of emerging market assets for overseas investors. The rapid pace of rate hikes by the Fed so far in 2022 had resulted in a huge exodus of foreign funds from Indian equities, exerting pressure on the rupee.
Foreign portfolio investors have turned net buyers of Indian stocks after nine straight months of net sales, beginning October 2021.
With markets globally turning optimistic of a less aggressive pace of US rate hikes, the rupee has recovered much ground after suffering a bout of heightened volatility last month.
The rupee weakened to a lifetime low of 80.06 per US dollar on July 19. So far in 2022, it has shed around 5.4 per cent versus the dollar.
“FII’s turning net buyers and improved sentiments globally continue to contribute to the gains in the rupee. Weaker dollar index is also running in favour of the rupee. Dollar index’s downturn continues as less aggressive stand by Fed is seen to induce weakness into the greenback,” said analysts at Mecklai Financial Services in a note.
“Oil prices continue to slip as weaker manufacturing data sparks concerns over the demand for the black gold,” the firm wrote.
Brent crude futures fell 29 cents to $99.74 a barrel on Tuesday, with WTI crude futures down 22 cents at $93.67 a barrel, Reuters reported. Lower oil prices reduce pressure on India’s current account deficit and inflation, given that the country imports more than 80 per cent of its oil needs.
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