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Indian Rupee Hits Record Low Despite Central Bank Intervention

 The rupee has lost more than 6% against the dollar so far this year as investors cool on Indian assets amid rising crude prices, a deteriorating trade balance and strong dollar.

An image of an Indian rupee note. File photo: Reuters.
India started exploring a rupee settlement mechanism with Russia soon after the invasion of Ukraine. Photo: Reuters


India’s rupee touched a record low for a second straight session amid persistent concerns over surging inflation and a weak growth outlook — and central bank intervention failed to stem the tide.

The partially convertible rupee was trading at 79.9652 against the dollar 11.30am GMT after touching a lifetime low of 78.97 earlier.

“There was sporadic intervention even today and that helped avoid a breach of 79 on the USD/INR in today’s session,” said a senior trader at a foreign bank. “But the Reserve Bank of India cannot prevent the depreciation, which is in line with what is happening globally,”

The RBI could make greater use of spot market intervention – which would run down central bank reserves – or may just opt to let the rupee weaken according to macroeconomic fundamentals, analysts and traders believe.


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Further Downside

Depreciation pressure on the rupee will continue into fiscal 2023, said QuantEcon Research in a note. The rupee has lost more than 6% against the dollar so far this year, and analysts believe it is likely to weaken further.

“The Indian Rupee has been adversely affected mainly by Foreign Institutional Investors pulling out funds from the equity market, rising crude prices, the deteriorating trade balance and dollar strengthening,” analysts at Emkay Wealth Management said in a note.

Foreign institutional investors have sold local shares worth $28.4 billion so far in 2022 and dumped bonds worth $2.3 billion.

Indian shares fell after a four-session rally, as worries about high oil prices and inflation returned to the forefront. Read full story

Asian currencies and stocks fell as weak U.S. economic data dented risk sentiment and overshadowed optimism around the easing of some COVID-19 restrictions in China.


  • Reuters with additional editing by Jim Pollard



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Indrajit Basu

Indrajit Basu is an India-based correspondent for Asia Financial and wears two hats: journalist and researcher (equity). Before joining AF he reported on business, finance, technology, wealth management, and current affairs for China Daily, SCMP, UPI, India Today Group, Indian Express Group, and many more. He is also an award-winning researcher. If he didn't have to pay bills, he would be a wanderer.


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