Rupee Weakens For The Fourth Straight Session, Dollar Strength Weighs

The rupee weakened on Tuesday, marking the fourth straight session of losses as the dollar reigns supreme on expectations of the Federal Reserve's aggressive interest rate hike path to control runaway inflation.

Reuters quoted that the rupee was last changing hands at 76.4954 per dollar, and PTI reported that the currency settled at 76.51, down 22 paise from the previous close of 76.29.

The rupee ranged between a high of 76.25 and a low of 76.53 against the American currency during the session.

According to Dilip Parmar, Research Analyst, HDFC Securities, the rupee depreciated following foreign fund outflows from domestic equities.

Indeed, the currency was also hurt by significant capital outflows and the sell-off in domestic stocks at the fag-end of the day on inflation worries and weaker-than-expected earnings reports so far. 

"A sharp sell-off in local equities may have brought aggressive bids from foreign portfolio investors (FPIs) and speculators. US bond yields are marching higher, with the 10-year yield just shy of 3 per cent level last seen in 2018, traders are becoming jittery about being long on the rupee," said Anindya Banerjee, Vice President for Currency Derivatives and  Interest Rate Derivatives at Kotak Securities.

"Over the near term, volatility can be high as USDINR trades with an upward bias and within a broad range of 76.20 and 76.80 per dollar," he added.

While global financial markets are going through wild gyrations driven primarily by the ebb and flow of news from the Russia-Ukraine war, the currency markets have been dominated by the dollar's strength in recent weeks.

"Global investors rushed towards safe-haven currencies taking cues of higher global bond yields. Surging commodity prices, hawkish central bank and geopolitical worries stalled global growth recoveries," Sriram Iyer, Senior Research Analyst at Reliance Securities, told PTI.

A firmer dollar index, foreign fund outflows, and higher crude oil prices could push USD/INR towards 76.70, while the central bank's dollar supply may limit the upside, he said, adding that the pair is expected to hold support around the psychological level of 76.

The greenback gained to hit a fresh two-year high on Tuesday, an index measuring the dollar's performance against six major currencies pushed above the 101 mark.

The energy-sensitive rupee has also been whiplashed since Russia invaded Ukraine in late February, with crude and commodities prices surging to multi-year highs and settling at above-average rates.

With India dependent on oil imports for about 85 per cent of its needs, the fears of widening external balances have hurt the rupee.

The rupee has depreciated for the fourth straight day against the dollar.