In The face of Rising Oil Price, The Indian Rupee Falls to a New low Against the US Dollar

The Indian rupee fell to a new low versus the US dollar Wednesday, as oil prices remained high. After hitting a record low of 77.81, the partially convertible rupee was trading at 77.80 per dollar. On May 17, the previous life low of 77.7975 was reached. The rupee rallied on Wednesday, closing 10 paise higher at 77.68 against the US dollar.

“The rupee is still hanging by a thread due to ongoing FII selling from emerging markets, which has resulted in Asian currencies falling, higher oil costs, and revised upward inflationary pressure in the coming quarters.” However, the RBI, which has actively and aggressively intervened in protecting the rupee from the heat so far, remains the only ray of hope for the rupee at the moment,” said Amit Pabari, MD of CR Forex Advisors.

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The Indian Rupee Falls to a New low Against the US Dollar
The Indian Rupee Falls to a New low Against the US Dollar

The Reserve Bank of India (RBI) hiked the key interest rate by 50 basis points on Wednesday, the second increase in five weeks, to curb price rises that it sees as hurting consumers in the near term. Meanwhile, the dollar index, which measures the strength of the greenback against a basket of six currencies, was up 0.01 percent at 102.55.

According to stock exchange data, foreign institutional investors were net sellers in the capital market on Wednesday, offloading shares worth Rs 2,484.25 crore.

After China enforced new COVID-19 lockdown measures in portions of Shanghai, global oil prices gave up some of their early gains. After reaching multi-month highs on Wednesday, Brent crude futures for August fell 15 cents, or 0.1 percent, to $123.43 a barrel.

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China’s May exports increased 16.9% year over year after COVID restrictions were eased, allowing several industries to reopen.

The Indian Rupee Falls to a New low Against the US Dollar
The Indian Rupee Falls to a New low Against the US Dollar

“The dollar index has recovered and is showing strength once more. The dollar index and the US bond yield both rose after the World Bank cut its global growth forecast to 2.9 percent. Higher crude oil prices are also a major threat to global inflation, which is driving safe-haven dollar purchases. Because of the Bank of Japan’s liberal monetary policies, the US dollar has risen to new 20-year highs against the Japanese yen. If the ECB fails to give direction on interest rate hikes, the dollar could gain ground against the euro. The 10-year bond yields in the United States have remained over 3.0%, supporting the dollar,” said Rahul Kalantri, VP Commodities at Mehta Equities Ltd.

“We expect the dollar index to continue volatile in today’s session ahead of the ECB monetary policy meetings,” he said, adding that the support level of 101.85 could be held on a closing basis. (With the help of the agency)

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