The Indian rupee on Thursday recovered on suspected Reserve Bank intervention after hitting a record low of 83.29 against the dollar during the day’s session.
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The rupee pared all its losses to end at 82.75, registering a gain of 27 paise over its previous close. The central bank reportedly sold around $ one billion via state-run banks after worries over surging US Treasury yields pushed the currency to a record low.
The rupee opened weak at 83.05 against the greenback but later lost ground to quote at 83.29. It also touched an intra-day high of 82.72. In the previous session, the rupee had settled at an all-time low of 83.02 against the dollar.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, slipped 0.17 per cent to 112.79. On Wednesday, US yields surged on disappointing response to a 20-year bond auction. Yields have spiked 13-14 bps across the curve with 2y at 4.57 per cent and 10-year at 4.14 per cent, both multi-year highs.
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Kaustubh Chaubal, Senior Vice President, Moody’s Investors Service, said, “The negative credit implications of the Indian rupee’s depreciation will be limited for Moody’s-rated companies in India. Nearly half of 23 rated companies have natural hedges against rupee weakness, while another four have global operations that enable them to match foreign-currency debt service with foreign-currency cash flows, often at the subsidiary level.”
“The remaining companies use financial hedges to manage their exposure to US dollar debt costs, have low exposure to rising US dollar debt costs, or have a combination of these factors to help limit the strain on cash flow and leverage,” Chaubal said.
Higher than expected inflation data in the UK and Eurozone reaffirmed fears that Central Banks will maintain their aggressive stance. Weaker than expected employment gains in Australia also showed the impact of aggressive monetary policy tightening.
