Rupee Weakens Sharply To 82 76 On Greenback Gains

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Rupee weakens sharply to 82.76/$ on greenback gains

ri-calendar-2-lineFeb 7, 2023

By: BlinkX Research Team

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The Indian rupee (INR) weakened by 68 paisa to 82.76/$ on Monday. The dollar gained in the global market on the back of stronger than expected jobs data as well as expectations that the Fed would continue its rate hikes; albeit at 25 bps each. The Bloomberg Dollar Index (DXY) got a boost above 103.20 mark. DXY measures dollar strength against a basket of hard currencies including Pound, Euro, Yen, Swiss Franc and the Chinese Yuan.

 

There have also been domestic triggers for the weakness in the rupee. FPIs have been consistent sellers. They sold $3.54 billion in Indian equities in January 2023 and started February on a negative note. The bounce in the Brent crude prices to above $80/bbl also dampened sentiments around the rupee. Rupee has been in a range in last couple of months after going as low as Rs83/$, towards end of last year.

 

In the last few weeks, RBI did not have to intervene aggressively to sell dollars and that is evident from the burgeoning forex reserves. India’s forex reserves had fallen from $647 billion to $523 billion last year due to RBI intervention to defend the rupee. However, forex reserves have now bounced back to $576 billion. The real reason for the dollar optimism was the robust economic data.

 

In January 2023, non-farm payrolls added 517,000 jobs against estimates of just 193,000 jobs. Unemployment rate fell to 3.4%, 20 bps lower than consensus. PMI services for January 2023 surged to 55.2 against estimates of 50.5. This has made a case for Fed hiking rates further. Now, a lot depends on what RBI does on 08th February. A 25 bps rate hike will certainly neutralize some of the bullishness in the dollar!

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