Rupee Hits Fresh Low Against US Dollar On Importers' Demand
At 2:05 p.m., the rupee was trading at Rs 83.99 a dollar.
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The Indian rupee fell to a fresh low against the US dollar as banks persistently bought the greenback on behalf of the oil marketing companies and other importers. The dollar index rose after the core US CPI came higher than expected, which also pressured the Indian currency.
The rupee depreciated 0.02% to Rs 83.9912 against the US dollar on Thursday, compared to Rs 83.9800 a dollar on Wednesday. At 2:05 p.m., the rupee was trading at Rs 83.99 a dollar.
Importers and custodian banks were buying the greenback from the foreign exchange market, said Anil Kumar Bhansali, head, treasury and executive director, Finrex Treasury Advisors LLP.
Banks purchased the dollar on behalf oil importers who panicked that the crude oil prices may further rise. Oil prices rose nearly 3% Wednesday due to supply-side worries as Hurricane Francine made a landfall on Louisiana weighed on the Indian currency.
A rise in crude oil prices increases India's import bill subsequently weighs on the rupee. As of 2:34 p.m., the November contract of brent crude on intercontinental exchange was 1.02% higher at $71.33 per barrel.
Moreover, most of the exporters refrained from selling the greenback anticipating further decline in the Indian rupee, which also weighed on the Indian currency, forex traders said.
"Rupee is expected to be in the range of 83.80 to 84.05 a dollar. Exporters are advised to take hedges above 83.97 a dollar levels and importers are advised to take hedges below 83.80 a dollar levels," said Bhanshali.
Intraday, the dollar index, which measures the strength of the US currency against six major currencies, rose 0.15% to 101.83 as US core inflation, which keeps food and energy prices aside, rose 0.3% on the month, compared to a 0.2% rise analysts estimated in a Bloomberg's survey. As of 2:32 p.m., the dollar index was trading 0.08% higher at 101.76.
Higher-than-expected core US inflation raised uncertainty over the pace of rate cuts after September. Meanwhile, investors have priced in a 25 basis-point rate cut in the Federal Reserve's policy meeting on Sept. 17-18.
"Markets are pricing in about 85% probability of the Fed reducing rates by 25 bps. Markets now await the US PPI data for further guidance," Ritesh Bhanshali, director at Mecklai Financial Service Ltd.
