The rupee on Thursday made a stunning recovery of 25 paise to close at 82.75 (provisional) against the US dollar. The recovery was aided by the Reserve Bank of India’s intervention after the domestic currency hit a fresh lifetime low of 83.29.
The rupee breached the 80 level versus the dollar for the first time on July 19, as crude oil prices rose in the international market, posing a fresh challenge for authorities grappling with stubborn price pressures. In the past few days, the value of the rupee has considerably depreciated and has always remained above Rs 80.
“After a fall of 65 paise yesterday and another 20 paise today an intervention by RBI was expected. They sold amid low volumes and took the pair down by 30 paise. It is not a trend reversal but just an intervention by RBI which has contributed to the reversal and as RBI moves out the upward move will restart,” Anil Kumar Bhansali, Head Of Treasury at Finrex Treasury Advisors, said.
Further aggressive rate hikes expected
According to analysts, the RBI will take more aggressive measures to safeguard the rupee. They suggest that there needs to be a coordinated effort from all the central banks of other nations as well to deal with the rising value of the USD.
“RBI likely sold dollars to curtail the excessive depreciation of the rupee. They have been intervening at various levels but the slide has been relentless. The woes of this dollar rally are being felt world over and coordinated action from the central banks may be required to really create a meaningful impact,” Saurabh Goenka, CEO & MD, of Zenith FinCorp, added.
As per the recent data released by the RBI, there has been some rise in foreign direct investments but that may not suffice to deal with the increasing value of USD. According to analysts, FDI may have increased but FPIs outflow will not help too much in the current scenario.
“We can surely see a downside towards 82.40 which should now act as a support but the trend is up as Asians are down and so are the European currencies. The US 10 year and 2 years at 4.15 and 4.57 respectively are a clear indicator of the trend of USD in future,” Bhansali said.
