The rupee ended only a touch weaker on Tuesday as the Reserve Bank of India intervened to limit any significant fall in the domestic currency, even as currency markets were dominated by the dollar globally. Investors had become uneasy with rising interest rates and geopolitical risks.
Bloomberg quoted the rupee at 82.3675 per dollar after opening at 82.3325 on Tuesday, with the domestic currency trading in a range of 82.3225 to 82.4175 against the greenback.
But at the interbank forex, the domestic currency edged higher by 6 paise to temporarily close at 82.34 against the US dollar, as against a new lifetime low of 82.40 on Monday, according to PTI.
Gaurang Somaiya, Forex, Gaurang Somaiya said, “Rupee traded in a narrow range after hitting an all-time low against the US dollar. Following better-than-expected non-farm payroll numbers from the US in the last few sessions The dollar has risen.” and bullion analyst, Motilal Oswal Financial Services told PTI.
After falling to an all-time low of 82.6,950 against the dollar in early trade on Monday, following a US jobs report on Friday that reinforced bets on more aggressive rate hikes, the rupee hit a new record low for the second consecutive day. level open. last session.
But according to Bloomberg, the local currency closed almost flat at 83.32 per dollar, helped by RBI intervention. In fact, after the Indian central bank sold dollars through state-run banks on Monday, the rupee strengthened from its new record low of 82.70 to about 82.40 in a span of about ten minutes.
The story was not much different on Tuesday, with a Reuters report quoting three traders showing that the RBI sold dollars through state-run banks and swapped buy/sell to limit losses in the rupee. .
Relative stability in rupee is thanks to RBI, traders said, adding, USD/INR 1-year estimated yield slipped to 2.89 per cent against 2.96 per cent in the previous session.
A trader at a private sector bank told Reuters that the RBI was conducting buy/sell swaps, making it less likely to intervene in the spot market. “RBI is probably driving its forward book further down.”
Globally, however, the dollar bounced back to multi-year highs in September.
With the slowdown in the bond market, interest rates are also rising. The release of US inflation data on Thursday could pave the way for another significant rate hike by the Federal Reserve in November, and tensions are already rising.
The greenback is already moving towards last month’s all-time highs and the outlook is giving another boost to dollar bulls.
Bets on anything other than higher interest rates through 2023 have been shattered by all but strong US labor market data and forecasts that Thursday’s inflation figures will remain stubbornly high, close to the 2002 top achieved last month. Almost pushing the dollar back.
The risk aversion was ideal in retaliation for an explosion caused by Russia’s Monday missile barrage on Ukrainian cities that destroyed the only bridge connecting Russia to the Crimean peninsula.
“The general narrative is a risk-averse one, which includes a measure to cut China off some semiconductors,” ING’s FX strategist Francesco Pesol said, citing escalation of the conflict in Ukraine and new US export controls.
“There are Fed minutes and US CPI this week which will be significant enough to strengthen Fed’s expectations and may continue to support the dollar,” said ING’s FX strategist.
The euro was stable but still below par with the dollar, ending four days of losses that saw the currency fall to a 20-year low of $0.9528 on September 26.
The Bank of England (BoE) extended bond purchases and Finance Minister Quasi Quarteng has vowed to push some budget announcements that haven’t exactly calmed UK markets, which remain on edge.
The risk-sensitive Australian dollar settled at a 2-1/2-year low of $0.62475.
According to analysts at National Australia Bank, the Australian dollar was the “whipping boy” of the market during the sell-off, and could see further downside soon given the weak mentality, Reuters reported.
Asian currencies saw a fall on Tuesday, while the dollar index rose to 113.22, on track to post its fifth daily gain.
At 145.51 against the dollar, the Japanese yen was approaching a level that needed official support a few weeks ago.
After Joe Biden’s administration restricted China’s access to US semiconductor technology and news articles backed Beijing’s Covid Zero policy, bearish bets on the yuan gained traction.
A recurrence of COVID-19 cases blew the outlook for the economy as the Chinese yuan weakened versus the stronger dollar, despite the People’s Bank of China’s ongoing strong midpoint fixing.
According to Bloomberg, Stephen Innes, managing partner at SPI Asset Management, wrote in a note, “Onshore dollar buying could prevent the PBOC from aggressive intervention, but I would still be cautious if the pair rises above 7.20. ” “It’s too early to say whether the PBOC will let the opportunity pass from here.”