The rupee plunged below 79 levels against the US dollar on Friday for the first time amid foreign fund outflows, concerns about rising fuel prices and the current account deficit. The Indian currency hit a fresh intra-day low of 79.12 against the dollar on Friday before making a recovery of sorts to close the day at 79.045. It had ended at 78.97 on Thursday.

“A spike in crude oil have also hurt the rupee. Crude resumed its uptick amid supply concerns. Meanwhile, Asian and EM peers were weak this Friday afternoon trade and weighed on the local unit,” said Sriram Iyer, Senior Research Analyst, Reliance Securities.

In a bid to contain imports, the Finance Ministry on Friday imposed an export tax on petrol diesel and aviation turbine fuel and also hiked the customs duty on gold.

“The Reserve Bank of India has been active in containing the volatility seen in the rupee in the last two to three days. The government has also given support to restrict the loss in the rupee,” said Dilip Parmar, Research Analyst, HDFC Securities. From here on, some stability is expected and rupee can be in the range of 79.30 to 78.50, he said.

Stable among the lot

Other emerging market currencies, too, have been depreciating in the backdrop of the war.

In the Financial Stability Report of June 2022, the RBI noted that the rupee, which was trading range bound before the knock-on effects from global geopolitical spillovers, experienced some volatility and depreciated by 5.7 per cent against the US dollar in 2022 so far (up to June 29). “The INR has, however, turned out to be one among the stable currencies relative to peers in the period since the war,” it said.

SBI Chairman Dinesh Kumar Khara also noted that many other currencies have weakened more against the dollar. “We have to live in the macro,” he said at an event.

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