Rupee falls to record low vs US dollar, slides past 82

The Indian rupee today hit a record low of 82.22 against the greenback as climbing oil prices and firm dollar index eroded sentiment. The rupee had closed at 81.88 in the previous session. Traders will now be closely looking at today’s US payrolls report to get a fresh indication of inflation pressures in the country. The dollar index, which tracks the greenback versus a basket of six major peers, was little changed at 112.032 following a rally from a two-week low.

The World Bank on Thursday trimmed India’s growth forecast for this financial year by a full percentage point amid rising commodity prices.

Asian equity markets were weak today, tracking lower closing on Wall Street overnight. Indian stock market benchmark Sensex was down over 250 points in early trade.  “The US markets ended lower yesterday as concerns mounted ahead of closely watched monthly nonfarm payrolls numbers due today that the Federal Reserve’s aggressive interest rate stance will lead to a recession. Asian markets are trading mostly in red tracking overnight losses on Wall Street. Traders will be concerned as the World Bank projected a growth rate of 6.5 per cent for the Indian economy for the fiscal year 2022-23, a drop of one per cent from its previous June 2022 projections, citing deteriorating international environment,” said Mohit Nigam, Head – PMS, Hem Securities.

Brent crude futures were above $94.31 a barrel and remained on course for strong weekly gains. 

The Organization of Petroleum Exporting Countries and its allies plan to reduce output by 2 million barrels a day from November. However, Saudi Arabia’s oil minister said the real-world cut will likely be around 1 million to 1.1 million because some members are pumping well below their quotas.

“Fed members continued to sound hawkish. Fed official Mester said that there isn’t much evidence yet to slow down the pace of rate hikes and that US is an unacceptably high inflation environment. Neel Kashkari said Fed is “quite a ways away” from pausing it’s tightening campaign. Fed member Evans said Fed is headed for 4.50-4.75% by early 2023,” forex advisory firm IFA Global said in a note. 

Analysts expect further weakness in rupee if oil prices strengthen further. “If the oil again jumps above $100 per barrel, it will surely ring alarms and further stress the deficits and the rupee. Further, the rupee is poised after the World Bank cut GDP growth estimate for India to 6.5% from 7.5% for 2022-23 and JPMorgan dropped the plan to include India in a widely followed bond index until at least next year after investors raised concerns about the domestic market’s ability to handle the large volume of capital inflows. Today we could see mild intervention by the RBI to control volatility in the spot market. Overall, we expect the USD-INR pair to trade higher in a range of 81.80 to 82.50, before breaking towards 83.00 levels,” CR Forex Advisors said in a note. 

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