The rupee plunge continued on the first day of July after weakening for three quarters in a row, falling to a new intra-day record low of 79.12 per dollar on Thursday as worries remain about persistent inflation and the current foreign funds’ exodus.
Bloomberg quoted the rupee at a new lifetime low of 79.0462 against the dollar and an intra-day weak level of 79.1188. But PTI reported that the currency gained 6 paise to close at 79.00, provisionally.
In recent months, the Reserve Bank of India has intervened in the spot and futures markets to shore up the currency but has repeatedly said it would only do so to prevent wild swings and would, at best, tinker at the edges.
The government, for its part, has increased the gold imports tax to 15 per cent from around 10 per cent to ease the pressure on the record weak rupee.
What has not helped the rupee is the dollar’s allure.
The safe-haven dollar gained strength on Friday as growing pessimism about the state of the world economy put pressure on riskier currencies, with the Australian dollar falling to a two-year low.
Market sell-offs and the rise of assets viewed as safer bets have been fueled by surging inflation and central banks’ haste to hike rates and stop the flow of cheap money.
The dollar index – which tracks the greenback’s performance against six counterparts – was on track for a nearly 1 per cent weekly gain, and was last up a quarter of a percent on the day at 105.020, according to Reuters.
“It’s a risk-off start to the second half of the year with equities and commodities down, so the dollar is stronger pretty much across the board,” Kenneth Broux, an FX strategist at Societe Generale in London, told Reuters.
“The Fed is committed to bring inflation under control but can it deliver a soft landing?” he questioned.
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