The rupee opened almost flat against the dollar on Wednesday driven by an increase in flight-to-safety bets, but investors looked to the Reserve Bank of India to intervene and prevent any significant losses in the domestic currency.
Bloomberg quoted the rupee at 82.32 per dollar after opening at 82.2775 compared to its previous close of 82.3225. The rupee is predicted to trade in a narrow range despite the dollar higher in the currency markets.
“With dollar index rising… Rupee opened around 82.30, RBI protected currency at higher levels. Yesterday RBI was present at 82.42 points and did not allow rupee to go beyond those levels despite continued weakness.” Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
Fears of supply chain disruptions from China’s new COVID-19 restrictions, tightening of geopolitical tensions and aggressive policy tightening by major central banks in their fight against high inflation will cause panic in financial markets due to a global slowdown.
Those concerns were confirmed by the International Monetary Fund after warnings of those risks and its global growth forecast were cut on Tuesday.
That risk aversion strengthened the dollar, and propelled the yen’s decline beyond the level that previously prompted the intervention of Japanese officials.
The risk-sensitive Australian dollar fell to a 2 1/2-year low.
The US dollar index, which compares the greenback to a basket of six major currencies including the yen, pound and euro, rose 0.16 per cent to 113.52 after hitting 113.54, its highest level since September 29.
Sterling fell to a two-week low after Bank of England Governor Andrew Bailey warned pension fund managers to complete position rebalancing by Friday, when the central bank would end its emergency bond-buying programme.
The euro fell overnight to $0.9670, its lowest level since September 29, and was trading near that level on Wednesday.
Data on US consumer prices on Thursday is likely to determine whether the Federal Reserve raises interest rates by 75 basis points for the fourth consecutive month in November.