Rupee weakens to a new low; traders see currency breaching 79/$ soon
The rupee weakened to a new low against the US dollar on Wednesday as domestic stock markets tumbled and as overseas investors showed no signs of letting up on sales of Indian equities.
At 10:15 IST, the BSE Sensex and the NSE Nifty were each trading 0.6 per cent lower than the previous close.
Asian stock markets suffered losses after weak US consumer confidence data dragged US stocks lower amid fears of higher interest rates hurting economic growth.
Foreign Institutional Investors have net sold $6.3 billion of stocks so far in June, the largest monthly outflow so far in 2022. So far in the calendar year, foreign investors have net sold $28.3 billion of equities.
Even as the Reserve Bank of India was said to be intervening in the foreign exchange market around current dollar/rupee levels, currency dealers expect the rupee to soon breach the 79 per US dollar mark.
Dealers said, moreover, that volatility in the exchange rate would persist in the near term as some traders had racked up large losses following a rush to cover large outstanding positions in the futures market on Tuesday.
“RBI might have intervened through selling USD/INR in exchange and Open Interest was seen building up to $4.8 billion just a couple of days before expiry. This position was bought by large corporates, traders and banks. To offset this buy position, they had taken a contra short position in OTC market,” CR Forex Advisors Managing Director Amit Pabari wrote.
“Finally, yesterday traders started winding up their huge short position and that resulted in a sharp up move in USDINR. Assuming 100 million have 1 paise move in Rupee, so $4.8 billion had to impact by 48 paise.”