The rupee on Thursday fell 19 paise to finish at a record closing low of 83.14 against the dollar amid global strength of the greenback and firm US treasury yields after the minutes of the last US Fed meeting indicated more interest rate hikes ahead to tame inflation.

A negative trend in the domestic equity markets accompanied by persistent selling by foreign portfolio investors (FPIs) also contributed to the fall of the rupee.

Analysts are now forecasting the rupee to hit 83.50 if the current trend persists and the Reserve Bank of India (RBI) does not intervene in the forex markets.

They added that if this level is broken, the currency may even hit 83.80 to the greenback.

The rupee had touched a historic intra-day low of 83.29 on October 20, 2022 and on Thursday it hit a day’s low of 83.16.

But dollar sales by state-owned banks on behalf of the RBI prevented any further fall of the currency. It had closed at 82.95 on Tuesday. The forex markets were shut for two days because of Independence Day and Parsi New Year.

While the rupee came under pressure on Monday because of a rally in the dollar and an upward movement in US treasury yields, its fall got intensified on Thursday on account of the latest minutes of the US Federal Open Market Committee.

“Most participants continued to see significant upside risks to inflation, which could require further tightening of the monetary policy,’’ the minutes said.

It led to risk-off sentiment among investors as they preferred safe haven assets over riskier ones such as equities.

Consequently, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose to a high of 103.60 over the last close of 103.43.

In the US bond markets, the 10-year treasury yield advanced to 4.31 per cent compared with the previous finish of 4.26 per cent.

“Rupee spot is trading at 83.14, up 18 paise, due to a rise in the US bond yields and a fall in the Chinese currency. We suspect the RBI may have intervened and sold dollars.

However, over the near term, bias remains upward and we could see dollar breaching the previous all-time highs. We expect a range of 82.90 and 83.80 on spot,’’ Anindya Banerjee, VP — currency derivatives & interest rate derivatives at Kotak Securities, said.

Forex circles said the depreciation in the yuan because of weak Chinese economic data
is adding to the rupee’s weakness. The Chinese unit has fallen more than 2 per cent this month

RBI alert

The Reserve Bank of India (RBI) on Thursday said in its monthly bulletin that inflation will continue to average well above the 6 per cent mark in the second quarter and that major reforms in perishable supply chains are needed to bring down the domestic economy’s vulnerability to recurring incidence of vegetable price shocks.

The consumer price index-based retail inflation shot up significantly to 7.44 per cent in July, which is much above the central bank’s comfort zone of 6 per cent.

“The incidence of supply shocks is not over — elevation in vegetable prices has extended into the first half of August. Accordingly, headline inflation is expected to average well above 6 per cent in the second quarter,’’ according to the article, State of the Economy, in the August bulletin of the central bank.

The article was authored by a team lead by RBI deputy-governor Michael Debabrata Patra.

Meanwhile, hopes of Indian government securities getting included in a global index strengthened on Thursday with a Bloomberg report saying JP Morgan could include the country’s sovereign bonds in its indices next year.