Tuesday marked the eighth day in 2022 when the Indian monetary unit slid more than half a percentage point against the dollar. It lost 0.53% to close at 79.37 to the dollar after plunging to another lifetime low of 79.38.
The rupee’s seemingly unidirectional plunge lately has mirrored the one-way trend in overseas commitment to Indian financial assets. The rupee has continued to plumb fresh depths in Mumbai as overseas funds began retreating from the city amid a pronounced interest-rate policy shift by central banks on either side of the Atlantic.
“A recessionary fear is gripping investors worldwide, which in turn is driving international investors back to dollar-backed assets,” said Anindya Banerjee, currency analyst at Kotak Securities. “The pressure on the rupee is likely to mount as the central bank is not too rigid to protect any particular level. Overseas funds are expected to extend their selling streak.”
The rupee has lost about 6% so far in 2022, with the currency losing more than a percentage point each on two trading days (please see table). One of those days of exaggerated currency movement coincided with Moscow’s invasion of its neighbor.
The declines have come amid unrelenting selling by overseas funds, which have sold in excess of Rs 2 lakh crore of local assets since October.
The Reserve Bank of India (RBI) is said to have intervened in the market Tuesday, but only to a limited extent. The central bank sold an estimated $500-700 million when the rupee was hovering around 79.10 earlier in the trade, dealers said.
“We did not spot strong RBI intervention when the local unit was sliding past previous record lows,” said a chief dealer at a large bank.
In Europe, economic uncertainties are looming large, boosting the dollar’s value against other major currencies.
Euro slid to a 20-year low against the dollar after recession worries gripped investors that were seen seeking the safety of dollar-backed assets.
The euro reportedly shed around 1.3% for the session to hit $1.029 in Europe. Germany recorded its first monthly trade deficit since 1991 as inflation soared.