The rupee collapsed to close provisionally at 79.60 against the greenback as the safe-haven stampede into dollar-denominated assets brushed aside almost every other currency, including the euro, which was on the brink of parity with the US currency for the first time since 2002.
PTI reported that the rupee fell 15 paise to close provisionally at 79.60 against the US dollar.
Not just emerging market currencies, but the rout against the dollar has been broad-based; almost every other currency has fallen to multi-year lows, underscoring increasing global recession fears.
On Tuesday, the euro was just short of parity with the dollar, on a technicality in foreign exchange markets terms, falling to as low as $1.0001, its lowest in nearly 20 years, as a cut in Russian gas supplies to Europe heightened rears of a recession in the eurozone.
AFP reported that the euro struck parity with the dollar before rising slightly, while Reuters and Bloomberg quoted it at the brink.
With Europe at the epicentre of the fallout from the Russia-Ukraine war, the risks to the economies there have risen.
On the domestic currency, at the interbank forex market, the rupee opened weak at 79.55 against the greenback and witnessed an intra-day high of 79.53 and a low of 79.66. It finally settled at 79.60, provisionally, down 15 paise over its previous close of 79.45, according to PTI.
Bloomberg quoted the rupee at 79.61 against the dollar after the currency hit a new intra-day lifetime low of 79.66.
That 79.66 per dollar rate is another intra-day record weak level, marking another new low in a series of weak lifetime rates hit in recent months. Now the rupee is only a hop, skip and jump away from a key psychological level of 80 per dollar.
“We could see 80 levels on the USD/INR very soon. The only force holding it back from falling there is the RBI. But with most other Asian currencies falling, we should get there sooner rather than later,” a senior trader at a private bank told Reuters.
According to Reuters, the Reserve Bank of India (RBI) was expected to sell dollars via state-run banks to prevent runaway depreciation as it has in recent months.
But the RBI has also made clear it would only intervene to prevent “jerky movements” in the currency and not fight a global trend, which is the case.
Indeed, the capital exodus from assets denominated by almost any other currency and into the safe-haven greenback was evident as the dollar index, which tracks the currency against a basket of six peers, rose to 108.47, the highest since October 2002.
“Risk-off sentiment is dominating global markets,” Yuting Shao, Macro Strategist at State Street Global Markets, told Reuters.
“The dollar is the go-to international reserve currency. So when there is a recessionary risk or a pickup of volatility, the greenback is the currency people rush to because that is the safest,” the macro strategist added.