The rupee on Wednesday fell below the 83- mark for the first time in its history and closed at a lifetime low as rising US bond yields triggered a rush for dollars in the forex markets.
The Indian currency sank 66 paise to end at 83.02 to the dollar against the previous close of 82.36.
Analysts said that demand for the greenback from state-run banks and custodian banks on behalf of foreign portfolio investors (FPIs) also put the rupee under pressure.
Moreover, the RBI did not aggressively intervene in the market.
``The USDINR spot closed at an all-time high at 83.02 and also at the highest point of the day. Flurry of buy orders from inter-bank dealers and speculators due to massive short covering pushed the market higher. It seems the central bank was not that visibly active and that caused prices to rise sharply,” Anindya Banerjee, VP, currency derivatives and interest rate derivatives, at Kotak Securities said.
“Global cues were dollar positive as risk-off sentiments, strong dollar index, weak Asian currencies and surging US bond yields all coupled to push the dollar higher. Over the near term, we expect the dollar to trade with a positive bias, within a range of 82.70 and 83.50 levels,’’ he said.
Ritesh Bhansali, vice-president, Mecklai Financial Services, said there was a strong possibility of the RBI intervening at 83-odd levels.
At the inter-bank foreign exchange market, the local currency opened strong at 82.32 but came under pressure as US bond yields climbed leading to the strengthening of the dollar. Yields on the 10-year US treasury were trading above the 4 per cent mark at 4.09 per cent at the time of writing this report against its previous finish of 3.99 per cent.
The rally came on account of growing fears that the US economy will slip into recession. Elsewhere, the dollar index which gauges the greenback’s strength against a basket of six currencies, was marginally higher at 112.71 against the previous close of 112.13. It hit a day’s high of 112.98.
The rupee had breached the 82 level for the first time on October 7: it has taken only eight sessions for the currency to hit 83. So far in this calendar year, the unit has depreciated almost 12 per cent.
Market circles added that though the rupee faced the burden of a rising greenback, there was also a sudden drop as a large PSU made dollar purchases. A CNBC TV-18 report said the company made around $500 million purchases.
Moreover, FPIs remained in a sell mode. Provisional data showed that they made net sales of Rs 454 crore in Wednesday’s trading at the stock markets.
With the rupee remaining under pressure, the markets are keenly watching Reserve Bank of India’s moves.
Analysts said the central bank may now tone down its dollar sales given the depletion in forex reserves.
According to the October bulletin of the RBI, so far, in 2022-23, the reserves have been depleted by $74.4 billion. However, a large part of this reduction was on account of a valuation loss due to the appreciation of the dollar against major currencies.
Rahul Kalantri, VP Commodities, Mehta Equities, said that the drastic fall in the rupee came due to the rise in US bond yields which also resulted in most of the Asian currencies getting weaker.
“We expect that the rupee might show some more weakness in coming days. We may see a 84 level very soon’’, he warned.
