Mumbai, July 14

The rupee ended at a new closing low on Thursday as it was weighed down by a strong dollar, which is appreciating against major currencies on expectation the US Fed may turn more aggressive with rate hikes to tame stubborn inflation.

The Indian unit, which opened about 9 paise weaker, closed at 79.8750 per dollar, down about 24 paise against the previous close of 79.63.

Once the rupee touched the 79.90 level, the central bank is believed to have sold dollars. However, sustained demand for Dollars from oil marketing companies and FPIs pushed the Rupee to an intraday low of 79.91 level.

At the intraday low, the RBI further stepped up dollar sales, ensuring that the rupee does not closes below 79.90.

With the Dollar Index rising beyond 108, forex dealers say the rupee is likely to breach the crucial 80 to the dollar mark soon.

Anindya Banerjee, Vice-President, Kotak Securities Ltd, observed that post closing, spot reference in the offshore bumped above 80 per dollar.

“Post US CPI, odds of a 100 basis points rate hike has increased significantly. Fed is not just hiking, they are increasing the pace of hikes in every meeting. At the same time, US yield curve has become inverted. An inverted yield curve hints at dramatic growth slowdown and even recession.

“This cocktail of aggressive Fed and growth slowdown is what can hurt flows towards emerging markets, like India, and cause USDINR to rise further,” he said.

Meanwhile, government securities yield rose on fears the US Fed may hike interest rates by up to 100 basis points to rein in inflation, which touched a new 40-year high in June at 9.1 per cent.

Yield of the 10-year benchmark G-Sec rose about 5 basis points to close at 7.3835 per cent (previous close: 7.3376 per cent). Price of this security fell about 30 paise to close at ₹94.31 (₹94.6075).

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