Mumbai: Sell-off in the Indian equity markets and sustained outflow of foreign funds left the rupee weaker by 25 paise on Thursday, August 22. The Indian currency closed at Rs 71.81 to a US dollar, its lowest point this year.
A mix of global and local factors impacted the currency which is inching closer to 72 a dollar mark.
“The outlook for auto, consumption and realty are still cloudy, influencing investors to shift to safe-haven assets. The rupee fell to near six months low due to continued outflow from foreign funds and weak exports,” said Vinod Nair, Head of Research, Geojit Financial Services.
Weak macroeconomic situation and outflow of foreign funds have hurt the rupee but the sharp sell-off on Thursday came following the recently released minutes of the Federal Reserve’s policy.
The Fed minutes showed that all members were not convinced with a rate cut, indicating a hawkish move in the future, which strengthened the US dollar. Most members did not see the rate cut as a beginning of a new rate cut cycle, rather a mid-cycle policy adjustment.
“Rupee recovered in last the 15 minutes after state running banks were spotted to sell dollars on behalf of RBI. Going forward movement in local equity markets and emerging market currency will be key for the rupee,” said Rahul Gupta, Currency Research Head, Emkay Global Financial Services.
Gupta added, “Technically the pair is trading within the rising wedging pattern. Also, the negative divergence still continues with it. Thus, no sign of buying is indicated. A break above 72 would add buying pressure towards 72.20. Major support are 71.80 then 71.65.”
