Mumbai: The Indian rupee recovered from its all-time low levels on Tuesday, 22 August 2023, and settled for the day higher by 19 paise at 82.94 (provisional) against the US dollar. The American currency retreated from its elevated levels in the overseas market, which supported the rupee.
The rupee opened at 83.10 against the dollar and touched an intra-day high of 82.85. It finally settled at 82.94, registering a rise of 19 paise over its previous close of 83.13.
Analysts said the rupee’s recovery was also supported by the weakness of the dollar in the overseas market. The dollar index, which measures the greenback’s strength against a basket of six currencies, fell 0.12% to 106.30.
In addition, the rupee was also supported by strong Asian currencies. The South Korean won rose 0.32%, the Japanese yen strengthened 0.18%, and the Chinese yuan gained 0.11%.
However, sustained foreign fund outflows and a weak trend in domestic equities capped the rupee’s gains. Foreign investors have pulled out more than $28 billion from Indian equities so far in 2023.
The rupee is expected to remain under pressure in the near term due to the ongoing risk aversion in the global markets. However, any recovery in the Indian stock market or a weakness in the dollar could help the rupee appreciate.
In the meantime, the Reserve Bank of India (RBI) is likely to continue to intervene in the forex market to prevent the rupee from depreciating too sharply. The RBI has so far sold a record $50 billion in the forex market this year to support the rupee.
The rupee’s depreciation has made imports more expensive, which could put pressure on inflation. However, the RBI is likely to keep interest rates unchanged in its next monetary policy review on August 31, 2023, in order to support economic growth.
Overall, the rupee is expected to remain volatile in the near term. However, the recent recovery from its all-time low levels is a positive sign for the currency.