Claw back from it's all time low, the rupee on Thursday opened 11 paise higher to 78.85 against the US dollar. This comes after the rupee on Wednesday hit lifetime low, weighed down by persistent foreign capital outflows, rising inflation, a strong dollar overseas, interest rates, elevated prices of crude oil and plunging markets.
In the previous session, the rupee depreciated 18 paise to close at a record low of 79.03 against the US dollar. On Tuesday, the rupee plunged by 48 paise against the dollar, with the currency touching a low of 78.85.
The Indian rupee has lost more than 6 percent since January 2022, and many experts fear the currency might hit the 80-mark against the US dollar over the coming months.
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Given the momentum and the global economic tailwinds, it seems that Rupee is headed towards 80 pretty soon. The ongoing rate hikes by the Fed to combat inflation is beginning to alter the flow of Dollar and a lot of it is moving back to the US and adding to Dollar strength. And whether we like it or not, a strong dollar always has an impact on global trade as USD is the dominant currency for settlement in global trade. India hence is definitely facing some heat as a strengthening Dollar is adding to the woes of rising crude prices thereby impacting the government's deficit, said Dev Ashish, SEBI Registered Investment Adviser & Founder, Stable Investor.
Moreover, this time and unlike the past, a stronger USD will have a more impact on inflation for emerging economies like India as this time, inflation is surely rising its head to uncomfortable levels. So in such a scenario, a depreciating currency when inflation is already rising, can put further upward pressure on domestic prices.
Coming to the Indian mutual funds, a strong dollar does not impact all equity funds equally. A falling Rupee largely benefits export-oriented industries like IT, Pharma, etc. But exchange rate is not the only criteria to choose a sector as sector-specific dynamics play a bigger role in performance of the sectors going forward, Dev added.
Kishore BS, Co-Founder and CEO, Stock Market Institute said, “I think the target for Dollar would be 80 and the same would settle there for a while before the FDI will start putting their money back into Indian Markets.”
The Indian Rupee continues to fall against the US Dollar and went to 79.04 on Wednesday after a fall of 48 Paisa a day before. Indian Rupee is likely to stay weak and may fall further considering the continuous fund outflow, rising crude prices and dollar liquidity issue, said Mukesh Vijayvergia, Founder of Nishkaera Financial Advisory.