NEW DELHI: The rupee on Thursday hit a fresh low against the dollar, as the latter strengthened against key global currencies, following inflation data released in the US overnight.
Hitting a fresh low for the fourth day, the domestic currency touched 79.83 against the US dollar.
Data released overnight showed US CPI inflation came in at 9.1 per cent in June, higher than a consensus estimate of 8.8 per cent.
Sugandha Sachdeva, VP-Commodity & Currency Research at Religare Broking said the unabated red-hot inflation data in the US has raised the case for a full percentage point rate hike at the Fed’s meeting later this month, given the Fed chair’s stance that inflation must be brought down as quickly as possible.
“The aggressive policy course by the US Fed to curb rising price pressures is exacerbating fears of a weakening growth outlook and leading to risk aversion in the markets. Besides, we have seen a relentless rise in the dollar index, while the euro has been hit hard as it tumbled below parity against the dollar for the first time in almost 20 years. This has led to a big moment depicting strength in the greenback as markets are expecting the US Fed to raise rates way more swiftly than its peers,” Sachdeva said.
ICICIdirect said the rupee is expected to depreciate amid a strong dollar and risk aversion in global markets. Market sentiments are hurt as red hot inflation in the US stoked bets that the Fed may have to raise interest rates much more than expected, even 100 basis points, it said in a note.
“Additionally, consistent FII outflows and concerns on looming recession may hurt the rupee,” ICICIdirect said, adding that dollar-rupee July futures are expected to trade in a range of 79.50-80.
Provisional data showed foreign portfolio investors (FPIs) turned sellers of domestic stocks to the tune of Rs 2,839.52 crore on Wednesday.
Jateen Trivedi, VP Research Analyst at LKP Securities said rupee traded with weakness after the inflation numbers in US came higher than expectations. “As the higher inflation shall put added pressure on Fed to raise the rates around 0.75 per cent, the Dollar index rallied above 108.30 level weakening other currencies. Rupee may trade in 79.50-80 range,” he said.
Rahul Kalantri, VP-Commodities at Mehta Equities said he expects the dollar index to remain volatile and continue to hold its key support level of 106.40 on a daily closing basis.
All eyes would now be on the ECB meeting lined up next week and that will provide further cues about the rupee-dollar exchange rate. Considering the macro-economic backdrop, the Indian rupee has its eyes set on the 80 to the dollar mark in the near term.
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