Depreciating for the eighth consecutive session and recording its single-biggest fall in more than two months, the rupee plunged by as much as 76 paise against the US dollar on Thursday, June 17, to settle at 74.08 amid a stronger American currency after the US Federal policy statement indicated an interest rate hike sooner than expected. At the interbank foreign market, the local unit opened weak at 73.65 against the dollar and registered an intra day high of 73.57. It witnessed a low of 74.08 against the dollar. In an early trade session, the rupee slumped 33 paise to 73.65 against the greenback. (Also Read: US Fed Signals Higher Rates In 2023, Bond-Buying Taper Talks As Virus Fades )
Rupee Records Single-Biggest Fall In More Than Two Months:
The domestic unit closed at 74.08 against the greenback, registering a fall of 76 paise over its previous close - registering its single-biggest fall in more than two months. On Wednesday, June 16, the domestic unit had settled at 73.32 against the dollar. The local unit has lost as much as 128 paise in the eight trading sessions to Thursday. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, gained 0.60 per cent to 91.67.
The partially convertible rupee, which touched 74.08 against the dollar, registered its lowest mark since May 3, 2021. Meanwhile, bond yields rose after hawkish Federal Reserve policy statement, which surprised investors.
According to news agency Reuters, India's benchmark 10-year bond yield closed down three basis points at 6.02 per cent but most other bond yields rose 3-4 basis points tracking the US benchmark bond yield which climbed 7.5 basis points.
What analysts say on rupee's weakness after the US Federal Reserve policy outcome:
Mr Amit Pabari, CR Forex:
''Someone might not have expected that even a ‘dot' matters a lot. A higher revision of inflation from 2.4 per cent to 3.4 per cent for 2021 and growth forecast from 6.5 per cent to 7.00 per cent along with few upward revisions for 2022 and 2023 led 13 members to turn hawkish for two rate hikes in 2023, Fed's dot plot suggested.
The global risk-on sentiment was seen disappearing as demand for safest security- US treasuries jumped and yield rose to 1.58 per cent. On the back of this, US equities corrected by 0.70 per cent-0.80 per cent and currently Asian markets are trading lower by the same.
''The recently released RBI's monthly bulletin has confirmed that central bank is offloading their forwards, encashing into cash and buying in the spot market. Overall, the rupee is likely to take a further hit from both the central bank's actions. The short-term range for the USDINR revises upward to 73.20-74.50.''
Mr. Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors:
''The rupee opened weak at 73.65 as FED gave an indication of an early rate hike in 2023 which means tapering could start as early as in August. The rupee remained weak for the entire day and closed at 74.08 against overnight closure of 73.32 as importers bought dollars in panic and short-covering by sellers as stop loss was hit.
The Rupee lost 76 paise during the day and was still in a depreciation mode in the overseas market. As most Asian currencies lost against the dollar and even the European currencies were down and the dollar index crossed 91.50 levels targeting 93.50 which will be a three month high.
With FED turning hawkish for the first time in a year rupee looks vulnerable and can touch a recent high of 75.32. It is yet to be seen whether RBI will be a mute spectator with $ 605 billion reserves or will actively curb the depreciation to control inflation.''
Mr. Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services:
“Rupee fell sharply in today's session after the Federal Reserve released its policy statement, wherein it held rates unchanged but turned a little hawkish in its commentary. The Federal Reserve Chairman said that there had also been initial discussions about when to pull back on the Fed's $120 billion in monthly bond purchases, a conversation that would be completed in coming months as the economy continues to heal.
From the US, Philly fed manufacturing and weekly unemployment claims and better-than-expected economic data could further strengthen the dollar. We expect the USDINR (Spot) to trade with a positive bias and quote in the range of 73.70 and 74.30.”
Domestic Equity Markets Today:
On the domestic equity market front, the BSE Sensex ended 178.65 points or 0.34 per cent lower at 52,323.33, while the broader NSE Nifty declined 76.15 points or 0.48 per cent to 15,691.40. The equity benchmarks mirrored losses in the global markets after the US Federal Reserve indicated that it may raise the interest rates at a much faster pace than expected.
HDFC Bank, ICICI Bank, HDFC, Axis Bank, and the State Bank of India were among the top drags on the Sensex. Also, Nifty Bank, Financial Services, Auto, Metal, Pharma, and PSU Bank indices also slipped between 1-2 per cent.
“An important event ended in the market yesterday, but today the market was neutral at the level of 15550/51700....Today, technology stocks and Reliance gave strong support to the index, which allowed the Nifty to close at 15,700,'' said Shrikant Chouhan, Executive Vice President, Equity Technical Research at Kotak Securities.
''The Nifty/Sensex could reach fresh levels on Friday if the indices don't close below the levels of 15550/51700. On an immediate basis, 15770/52500 and 15850/52700 levels would be major hurdles. Below the levels of 15550/51700, the Nifty/Sensex would gradually fall to 15400/51300 or in the worst-case scenario 15300/51000,'' added Mr Chouhan.
Meanwhile, according to exchange data, the foreign institutional investors were net sellers in the capital market on June 16 as they offloaded shares worth Rs 870.29 crore. Brent crude futures, the global oil benchmark, rose 0.12 per cent to $74.48 per barrel.