Rupee On The Brink Of 80 Per Dollar, Closes At New Record Low Of 79.99 After Settlements

The rupee ended Thursday on the brink of 80 per dollar, just a technicality of a touch lower at 79.99 against the greenback, keeping it away from the key psychological level.

Bloomberg and Reuters reported that the partially-convertible rupee closed at 79.87 per dollar, while PTI quoted the rupee at 79.99 close after settlements.

A PTI report showed the rupee edged ever so closer to the historic low of the 80 per dollar mark as it declined a little over 18 paise to settle at 79.9975 on a rampant and stronger greenback in overseas markets.

At the interbank foreign exchange market, the rupee started the day on a strong note and touched a high of 79.71 a dollar in early trade. The currency, however, lost momentum after the dollar surged to a 24-year high against a basket of global currencies.

The rupee finally settled at the day's lowest level of 79.9975 to a dollar, down 18 paise over the previous close of 79.81.

That marks the 27th time the currency has hit a new lifetime low since Russia invaded Ukraine late in February and a record weak close every single day this week. 

"The Indian rupee becomes the median performer among the regional currencies. The rupee closed at a record low for the fourth day in a row amid safe-haven demand for the dollar after US inflation surged to a 41-year high. The rate markets now are pricing aggressive rate hikes from Federal Reserve which supported the dollar," Dilip Parmar, Research Analyst at HDFC Securities, told PTI.

The spot USD/INR delayed the level 80 in today's session but is expected to break in the coming days. The pair has resistance at 80.90 after crossing 80 while the support shifted to 78.80 from 78.50, he noted.

PTI reported that some leading banks, such as the State Bank of India (SBI), were already quoting above 80 levels for selling the US dollar.

For the rupee, though, that is not the end of the rife. The fears now are that once the rupee breaches the 80-to-a-dollar level, the fall could be even steeper, as a break of key psychological rate increases bets in favour of a free fall after, as we have witnessed since the rupee weakened beyond the 77 per dollar rate, based on the pace of weakness.

“The rupee continued to remain under pressure as the dollar rose sharply against its major crosses. Today it fell to fresh all-time lows against the US dollar," Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services, said.

hat news comes on the heels of another historic moment in currency markets.

Indeed, the euro plunged below parity to a 20-year low for the first time on Wednesday; while the single currency recouped some losses early on Thursday, it soon lost its allure and dived right back below $1 on concerns over an energy crisis and political turmoil in Italy.

"There's clearly a broader preference for the dollar in the markets at the moment given the broader context of ongoing geopolitical uncertainty, the pressures in Europe from the energy supply situation and expectations of interest rate rises in the US," Shaun Osborne, Chief FX strategist at Scotiabank, told Reuters.

The greenback extended its sharp rally as expectations increased for a steeper rate hike from the Federal Reserve.

The dollar also jumped to a 24-year high against the Japanese yen as the Bank of Japan maintained a dovish stance in contrast with hawkish global moves by central bank peers.

Bloomberg reported that swap markets showed traders were now pricing in a significant possibility that the Fed will dole out a 100-basis-point hike in July in the wake of hotter-than-anticipated inflation data.

"The concerning aspect in the CPI numbers was the breadth of increases," Shane Oliver, chief economist at AMP, told Reuters, and he said nearly 90 per cent of the US CPI components saw increases of more than 3 per cent.

That drove the dollar to soar to a 20-year high, emerging as a preferred save haven amid growing economic risks.

Market pricing on the Chicago Mercantile Exchange's (CME) Fed watch tool indicated a 78 per cent chance of a 100 basis increase. However, Mr Oliver said this could only be a kneejerk reaction to the high inflation reading.

"I think the Fed will stick to 75 - which is still a high number - if they go to 100, it will look like they are panicking. Only time will tell, though; the Fed does have an unconditional commitment to get inflation back down,' he added.

A separate widely accepted indicator of a pending recession pointed to one on the horizon.