Will Rupee depreciate further from the all-time low against US Dollar?

    The Indian rupee has depreciated against dollar, and is it expected to fall on Tuesday due to global risk aversion, further FII withdrawals, and a strong dollar. The local currency lost 60 paise to close at an all-time low of 77.50 against the US dollar in the previous session, weighed down by the greenback’s strength overseas and continuing foreign fund outflows.

    “The US dollar advanced amid risk aversion in global markets and hawkish statements from Fed officials. Market sentiments were hurt as investors fear that high inflation is threatening to eat into corporate profits and rein in consumer spending. Additionally, the outlook for the global economy is looking gloomy amid supply chain disruption, lockdown in China and Russia’s war against Ukraine. Rupee future maturing on May 27 depreciated by 0.76% amid strong dollar, sell-off in domestic markets and persistent FII outflows.

    The rupee breached the psychological barrier of 77 to a dollar on Monday to hit a lifetime low of 77.46 amid the greenback strengthening against major global currencies on the back of a hawkish stance by the US Federal Reserve.

    The rupee is expected to depreciate today amid risk aversion in the global markets and firm dollar. Market sentiments were hurt as supply disruption due to Covid-19 lockdown and war between Russia and Ukraine have heightened fears about how growth will hold up around the globe and on top of this major central banks are ending easy money era. Moreover, persistent FII outflows will hurt the rupee. US$INR (May) is expected to trade in a range of 77.45-77.90.”

    The rupee, which closed 76.92 per dollar on Friday, opened weak at 77.1 after the dollar index gained to move beyond the 104-mark, with the US 10-year bond yield trading at a four-year high of 3.15 per cent.

    The previous all-time low was hit on March 7, when the rupee ended the day at 76.97 to a dollar.

    Risk appetite has weakened amid mounting concerns about inflation that may trigger more aggressive rate hikes by global central banks, according to analysts. “A sell-off in the global equity markets which was triggered by the hike in interest rates by the U.S. Federal Reserve, the war in Europe and growth concerns in China due to the COVID-19 surge, led to the rupee depreciation,” Emkay Global Financial Services said in a note.


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