The greenback, which has rallied against major currencies since the Fed raised interest rates on Wednesday, added further with the dollar index hitting a 20-year high. In the UK, the biggest tax cut since 1972 sent sterling and government bonds into free fall. The pound fell more than 3% against the dollar to levels last seen 37 years ago.
The rupee ended the week down 1.6 percent, its worst weekly drop since April 9, 2021. The dollar was trading above the 81 level in the early hours. However, the second half saw a number of major purchases, which dealers said may have been on behalf of the central bank. The rupee last closed at 80.99 – 12 times weaker than Thursday’s close of 80.87.
“The rupee hit a high of 81.23 in early trades, followed by an intervention from the RBI that took it to 80.76. But the spot rose to close at 80.99 due to the negative current below. rupee,” said KN Dey of United Financial Consultants.
Dealers said the combined RBI intervention in both the spot and futures markets would amount to more than $100 billion. Although the number is high, dealers consider it reasonable considering the volatility. With the conflict in Ukraine possibly taking a turn for the worse, no one is willing to say the worst is behind for the currency.
Dey said the RBI intervention could be aimed at controlling any speculative activity in the market. “Pressure on the rupee will continue for some time. With good Indian fundamentals, we may not see a sharp decline. The rupee is likely to fluctuate between 80-82. .50 for the next 3 months, ie until the end of December,” he said. With a week to go before the decision of the RBI’s monetary policy committee, uncertainty in the foreign exchange market is expected to persist.
“Most currencies are under pressure as the dollar continues to strengthen. Yen volatility remains elevated after the Bank of Japan’s intervention to curb the sharp decline. We anticipate the dong The dollar-rupee will trade sideways and quote between 80.40-81.20,” said Gaurang Somaiya, gold and forex analyst at Motilal Oswal Financial Services.