Rupee Falls to New Low, Heading Towards 84 Amid Global Market Concerns
New Delhi [India], August 5 The Indian rupee fell to an all-time low against the US dollar on Monday, driven by global stock market sell-offs and concerns about a potential US recession.
As of 12:18 pm, the rupee was trading at 83.85, compared to Friday's closing rate of 83.75. It opened at 83.78, surpassing the previous record low of 83.7525 set on Friday.
Analysts attribute the rupee's decline to global market weakness, fears of a US recession, and ongoing geopolitical tensions.
"Concerns about a possible US recession have led to fears of foreign capital outflows from India and other emerging markets," said Ajay Kedia from Kedia Advisory in Mumbai. He noted that the recent sell-off in US and Asian equities, triggered by a disappointing US jobs report, has exacerbated market concerns.
The weak US jobs report from Friday revealed that only 114,000 jobs were added in July, falling short of the 175,000 expected increase. Additionally, the unemployment rate unexpectedly rose to 4.3 percent, and wage growth slowed more than anticipated.
Kedia suggested that the Reserve Bank of India (RBI) might allow the USD/INR rate to rise to 83.90. He identified support at 83.45 and resistance at 83.95, noting that a break above 83.95 could push the rate to 84.10/84.20.
Veteran financial market analyst Jamal Mecklai commented, "US recession fears and equity market declines are creating a risk-off sentiment. A significant and prolonged equity decline will naturally put pressure on the rupee."
In 2022-23, the Indian rupee was frequently in the news due to negative factors such as tightening monetary policies by central banks, the Ukraine war impacting crude oil prices and global energy supply chains, and the strengthening of the US dollar index. The rupee depreciated by over 11 percent cumulatively in 2022, hitting a historic low in mid-October.
The RBI's interventions in the forex market to stabilize the rupee through liquidity management and dollar sales appeared to have some effect. The RBI monitors the foreign exchange market closely and intervenes to manage volatility, without adhering to a predetermined target level.