Rupee Weakens Sharply To Near 79.70 Per Dollar, Tracking Risk Off Bets Globally

Rupee Today: The Indian currency weakened sharply against the dollar, tracking a sell-off in risk assets even as domestic equities bucked that trend.

Rupee Weakens Sharply To Near 79.70 Per Dollar, Tracking Risk Off Bets Globally

Rupee Today: Rupee falls 22 paise to close at 79.67 per dollar

The rupee weakened sharply against the dollar on Thursday, tracking a broad sell-off in global risk assets even as domestic equities bucked that trend.

Bloomberg showed the rupee was last changing hands at 79.6800 per dollar, down about 23 paise from its previous close of 79.4475.

At the interbank foreign exchange market, the Indian currency opened at 79.60 and moved in a range of 79.60 to 79.71 during the day and finally ended at 79.64 against the greenback, down 19 paise over its previous close. 

Reuters said the partially convertible rupee ended at 79.6725, having flirted with the key 79.70 level occasionally during the session. The local unit had closed at 79.4450 on Wednesday.

Traders widely expect the rupee to tread the 79-80 range for at least another week, with no major events around the corner.

"Within that broad range, there is choppiness depending on sentiment. A 25-30 paise broad move one day gets covered the next day, so within this range there's volatility," Gaurang Somaiya, Forex & Bullion Analyst at Motilal Oswal, told Reuters.

The US central bank policymakers committed to raising rates as high as necessary to tame inflation, he said, and further added that "we expect the USD/INR (Spot) to trade sideways and quote in the range of 79.20 and 79.80."

Overall mood was quite sombre in Asian emerging markets as the region's economic engine China's currency continued its poor run with a 0.2 per cent decline to a three-month low.

Falling oil prices were no respite to the rupee on Thursday as the dollar climbed to a three-week high

The dollar rose 0.2 per cent towards a three-week high hit earlier this week, after minutes from the Federal Reserve's July meeting suggested the central bank would keep raising rates to tame inflation.

The minutes of Fed's July meeting showed that the central bank was contemplating paring back the pace of future rate hikes in line with a slowdown in inflation but saw "little evidence" yet that pressures were easing.

Traders are now pricing in around a 57.5 per cent chance of a 50-basis-point rate hike by the Fed in September and a 42.5 per cent chance of a 75-bp increase.

The dollar remained on the front foot and Asian equities retreated further on Thursday, uninspired by Wall Street's attempts to pare losses after the Fed minutes.

Sterling briefly dropped below the $1.2 level to a three-week low, thanks to the stronger dollar, and also suffering from red hot inflation figures released the day before which reinforced fears about the UK growth outlook.

The pound was last down 0.3 per cent at $1.2015, while the euro shed 0.2 per cent to $1.0157 and the dollar climbed a touch on the yen to trade at 135.25 yen, just off its overnight one week high.

This left the dollar index up 0.22 per cent at 106.89, its highest since late July.

"The bigger picture for the dollar is that it's in a strong uptrend," Matt Simpson, a senior analyst at brokerage City Index in Brisbane, told Reuters adding it has now paused a weeks-long pullback

"In some ways, bulls are looking to step back in and I think the Fed minutes gave them a reason to do so."

But domestic equity benchmarks defied that gloomy global trend and extended their bull run into the fifth straight week to hit four month highs.