The rupee seems to be moving fast towards the 80 to the dollar mark. The Indian unit (INR) on Tuesday closed at a fresh record closing low amid the dollar gaining strength against major currencies and FPI related equity outflows.
The Indian unit (INR) ended at 79.5975 per dollar, down 16 paise over the previous close of 79.4375.
The central bank is believed to have intervened in the market, which helped the domestic unit strengthen from the intra-day low level of 79.6575. Demand for the greenback came from FPIs and oil marketing companies.
Though the rupee ended at a fresh closing low, aggressive dollar selling by the RBI ensured that it recovered from record intra-day low levels, said a currency dealer with a public sector bank. INR had opened about eight paise weaker at 79.51.
The euro hit parity level against the dollar (1€ =1$) on fears that an annual maintenance shutdown of the Nord Stream 1 pipeline, which carries Russian gas to Germany, may last longer than 10 days due to the war in Ukraine and could trigger an energy crisis in Eurozone.
Uday Kotak, MD & CEO, Kotak Mahindra Bank, tweeted: “€ at 1:1 to $. Gold, crypto, pound and yen crumble. The supremacy of US currency. Emerging market countries need to be alert.
“Some of the biggest risks emanate from currencies and can destroy some countries. Look thy neighbours Lanka and Pakistan.”
With global slowdown triggering safe haven move by investors towards dollar assets, dollar tightness is being witnessed in emerging market economies, including India, according to experts.
To enhance dollar inflows, the RBI last week had announced temporary measures, including exempting incremental Foreign Currency Non-Resident (Bank) [FCNR(B)] and Non-Resident (External) Rupee (NRE) Term Deposits from maintenance of reserve ratios; doing away with ceilings on interest rates on these deposits; and doubling the limit for eligible borrowers under external commercial borrowing to $1.50 billion per year.
Further, on July 11, the central bank decided to put in place an additional arrangement for invoicing, payment, and settlement of exports/ imports in the rupee in the backdrop of currency unit sinking to fresh closing lows. Invoicing foreign trade in rupees is aimed at reducing demand for foreign exchange.