Rupee slips to a three-month low after the greenback’s sharp upward march

• Asian currencies like Yuan and Won also suffered from the better-than-expected US economic data.
• The rupee also reversed its strong performance on Thursday, when it closed 6 paise higher.
• Most experts expect the Indian currency to remain volatile in the next few weeks.
  

Indian Rupee slipped to a three-month low on Friday, after the dollar index gained sharply on account of better-than-expected home sales data. The rupee, which opened 20 paise lower in early trade, slumped by a massive 34 paise to close at an all-time low of 83.47 (provisional) against the US dollar.

In intraday trade, the rupee touched a low of 83.52 against the American currency. The rupee had earlier recorded its lowest closing level of 83.40 on December 13, 2023.

“As the dollar index rallied above 104.08$, this added pressure on the rupee following a positive gap-up opening witnessed yesterday at 83.05. The rupee has fallen sharply by more than 0.30 rupees from its high of 83.05 over the last two days,” said Jateen Trivedi, VP Research Analyst, LKP Securities.

The dollar index, which gauges the greenback's strength against a basket of six currencies, gained 0.72% to 104.17 as concerns over the slowing global economy boosted demand for the greenback.

Most Asian currencies suffered from the better-than-expected US economic data, with the Chinese Yuan as well as the Korean Won falling in the trade.

The rupee also reversed its strong performance on Thursday, when it had closed 6 paise higher. Even the gains seen in domestic equities on Friday could not stem the fall.

Most experts see the currency trading in a volatile zone. “Despite strong gains in the domestic equity markets and profit-taking in global crude oil, the rupee witnessed a drastic fall. We expect the rupee to remain volatile next week and the pair could trade in the range of 83.10-83.70,” said Rahul Kalantri, VP-commodities at Mehta Equities.

Analysts said dollar demand from importers, mainly oil companies, and debt repayment outflows weighed on the rupee. Brent crude is trading at around $85 per barrel on Friday.

“Despite the dovish view on interest rates in the US, specific data-driven interest rate cuts are still distant. The rupee's range can be expected to be between 82.85-83.55, with volatility likely to persist," says Jateen Trivedi, VP Research Analyst, LKP Securities giving reasons for the currency’s volatility.

(With PTI inputs)