The Indian rupee opened at a fresh record low on Tuesday as global funds continue to pull out of domestic stocks amid the ongoing unwinding of the yen carry trade and rising fear of recession in the US.
The local currency depreciated 6 paise to a record low of 83.90 after opening at 83.86 against the US dollar, according to Bloomberg data. It closed at 83.84 against the greenback on Monday. The rupee fell as low as 84.25 during the overnight session in the NDF market in New York, Bloomberg data showed.
After market close yesterday itself, the USD/INR pair had even traded Rs 84.14 levels, according to Kunal Sodhani, vice president of Shinhan Bank. “Today may be intervention was seen in offshore during opening hours due to which USD/INR opened lower around Rs 83.86 levels.”
Rupee weakness was also due to higher demand for the greenback from oil importers on account of the rising Brent crude oil price. Brent crude rose 1.09% to $77.13, aided by a 0.14% rise in the dollar index. Oil prices rose on fears of a spreading West-Asia conflict that could hit supplies, while worries of a possible US recession linger.
In the previous session, global funds sold domestic equity worth Rs 10,000 crore as markets fell across Asia, Europe, and America.
The rupee is being sold off in good times and bad times, indicating the demand for the dollar is due to the pullout of FPI from the Indian equity market amid high valuation concerns, according to Anil Kumar Bhansali, head of Treasury and executive director, Finrex Treasury Advisors LLP. “Depending on RBI, we expect the rupee to be in a range of Rs 83.85-84.05”.
The unwinding of carry trade in the Japanese yen led to its appreciation against the US dollar, which disrupted global markets.
The Bank of Japan, in line with market expectations, hiked its benchmark interest rate to 0.25% farom 0.0–0.1% last week. Expectations of further hikes by the central bank have resulted in a sell-off of the yen-funded carry trade.
