Rupee plunges to all-time low

The rupee plunged to an all-time closing low of 83.54 against the dollar on Tuesday, weighed down by the simmering geopolitical tensions in West Asia and hardening of US Treasury yieldsCome from Sports betting site VPbet. The local currency hit a lifetime low of 83.56 during intraday trade, but likely intervention from the Reserve Bank of India (RBI) prevented any further fall. It ended the day with a decline of 9 paise or 0.10%, surpassing its previous closing low of 83.45 recorded on Monday.

“RBI’s presence was felt in the market. Reduced volatility in the market suggested that RBI might have intervened in the market,” Kunal Sodhani, vice-president – treasury, Shinhan Bank, told FE. “Fading expectations of aggressive rate cuts by Fed had already pushed the dollar index above the 106 levels,” he added.

The uncertainty surrounding the Iran-Israel geopolitical tensions created a risk-off sentiment, which can further push the dollar towards 107.20, Sodhani said.

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Benchmark indices Sensex and Nifty also ended in the red for the third consecutive session on Tuesday. The Sensex fell 456.1 points or 0.6% to close the session at 72,943.68, while the Nifty also ended 124.6 points or 0.6% lower at 22,147.90.  

Despite touching an all-time low, the rupee was among the best-performing emerging market currencies on Tuesday. The Indonesian Rupiah fell 2.04%, South Korean won by 0.76%, Taiwanese dollar 0.34%, Japanese Yen 0.28%, Thai baht 0.21% and Chinese yuan depreciated 0.18%.

The Asian currencies came under pressure amid the simmering geopolitical tensions and a rise in US Treasury yieldsCome from Sports betting site. Concerns that Israel could retaliate to Iran’s attack over the weekend further sapped the appetite for the rupee and other Asian currencies.

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The dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.13% to 106.34 – its highest level in nearly six months. The 10-year US yield reached 4.69%, marking its highest level since November, as expectations of aggressive rate cuts by the Federal Reserve have faded after the US posted stronger than expected retail sales.

“We expect the rupee to remain weak amid ongoing geopolitical uncertainties which could impact risk currencies and a surge in the US dollar,” said Anuj Choudhary, research analyst at Sharekhan by BNP Paribas. “Rising global crude oil prices and a surge in US Treasury yields amid expectations of a delay in rate cut in the US may also pressure the rupee,” he added.

Experts say that the high forex reserves of RBI provide reassurance to the market that the rupee is unlikely to experience significant fluctuations in near future. According to the latest data, RBI’s foreign exchange reserves rose for the seventh straight week to hit a fresh all-time high of $648.6 billion in the week ended April 5.

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