- Rupee hit 2-month low of 64.43 against dollar on Wednesday
- Rupee remained volatile today against the US dollar
- Last week, India's forex reserves rose past $400 billion for first time
Here are 5 things to know about rupee/dollar trade today:
1) The dollar hovered close to an eight-week high against the yen, buoyed with US Treasury yields having risen to one-month highs before the Federal Reserve's policy announcement. Investors remained cautious ahead of the outcome of the US central bank meeting in the United States.
2) The Fed is expected to announce its balance sheet reduction plans and provide an outlook for interest rate hikes for the rest of the year.
4) India's April-June current account deficit widened to 2.4 per cent of gross domestic product, or $14.3 billion - its highest in four years - as imports surged. But strong capital inflows comfortably covered up the gap, data from the Reserve Bank of India showed on Friday. Meanwhile, in another release on Friday, the RBI said that India's foreign-exchange reserves rose past $400 billion for the first time ever. The strengthening reserves will help the RBI prevent rupee volatility ahead of an expected reduction in US stimulus, say analysts. Despite its recent decline, the rupee is up more than 5 per cent for the year so far amid broad dollar weakness. Some analysts expect the rupee to weaken over the course of this year. "Rupee will move towards the 65 mark/dollar during the course of the year. The higher forex reserves are due to high capital flows even in the face of current account deficit increasing," says Madan Sabnavis, chief economist of Care Ratings. By March, India Ratings expects rupee in the range of 65-65.5 against the dollar.
5) Global gold prices were steady on Wednesday. A stronger dollar makes greenback-dominated bullion more expensive for those holding other currencies. Higher interest rates lead to higher bond yields and dampen demand for non-interest yielding gold. (With Agency Inputs)