INR Falls to New Low; Dollar Index Jumps to 20-Yr High: Key Factors
Today’s rupee slide comes in the backdrop of a broad rally in the greenback and weakness in domestic equities. The dollar index jumped to its highest since October 2002 at 108.31, majorly due to the weakness in the euro, which hovered close to a 20-year low near parity to the dollar amid concerns that an energy crisis could tip Europe into recession, while the U.S. Federal Reserve continues to aggressively tighten policy to curb inflation, stated reports.
“Talking about USDINR, 79.80/80.00 levels acts as a resistance while a close below 78.80 levels is required in order for the pair to go back in a consolidation mode,” noted Kunal Sodhani, AVP, Global Trading Center, Treasury, Shinhan Bank India.
India’s June trade deficit widened to a record $25.63 billion from $9.61 billion a year ago amid a rise in crude oil and coal imports. The widening deficit, a fall in the foreign exchange reserves and rising global energy prices are also supporting the rupee’s spiralling rout.
Further, relentless outflows of foreign investors from Indian markets are also pressurizing the domestic currency. FPIs have offloaded Indian equities worth Rs 2.21 lakh crore so far this year.
Traders await the June consumer price inflation data, which will provide cues on the Federal Reserve’s plans to dramatically inch towards an increased interest rate hike to tame the soaring inflation.
(Reporting by AJFX Limited, Editing by Shivangi Jadav)