NEW DELHI – The rupee was steady versus the greenback on Thursday as traders exercised caution ahead of crucial events lined up in the next couple of days, including the European Central Bank’s policy statement and the release of inflation data in the US.
Rising crude oil prices and relentless sales of Indian equities by foreign portfolio investors, however, ensured that the rupee was precariously close to weakening past record lows.
The partially convertible rupee was last at 77.73/$1, unchanged from the previous close. The 77.73/$1 level was the record closing low that domestic currency settled at on May 19.
With inflation in the Eurozone jumping to a record high in May, the ECB is widely expected to move towards a tighter monetary policy.
The US inflation data, meanwhile, is expected to influence the quantum of future rate hikes by the Federal Reserve which has signalled aggressive monetary tightening in order to rein in a record rise in consumer prices.
Higher interest rates in advanced economies dim the appeal of assets in riskier emerging markets such as India.
Overseas investors have rushed to exit Indian equity markets over the last few months, with their net sales so far in the year at a massive Rs 1.7 lakh crore.
The surge in oil prices brought about the supply disruptions caused by the Ukraine war have worsened the outlook on the rupee as India imports more than 880 per cent of its fuel needs.
Brent crude futures for August nudged up 12 cents to $123.70 a barrel by 0033 GMT, while the US West Texas Intermediate (WTI) crude for July was at $122.17 a barrel, up 6 cents.
The domestic currency, however, has been spared too much damage – depreciating to a lower extent - than many emerging market peers, because of aggressive dollar sales by the Reserve Bank of India, dealers said.
With the RBI’s headline, foreign exchange reserves currently at a formidable $600 billion speculation against the rupee are fraught with risk.
“Sword is still hanging on the rupee amid persistent FII selling from EM’s, elevated oil prices and upward inflationary pressure for coming quarters,” CR Forex Advisors MD Amit Pabari said.
“However, the only ray of hope for the rupee presently will remain RBI, who has actively and aggressively participated to protect the rupee from the heat so far. As long as the pair is trading below 77.80 levels, there remains a hope for 77.40-77.50 levels.”
Source Name:-Economic Times