Rupee falls to near two-month low ahead of monetary policy on Omicron fears

The rupee fell to a near two-month low on Monday as equities fell tracking the rise of the Omicron variant of coronavirus in India.

The fall in the exchange rate came when the six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI) started its three-day meetings on Monday. The policy will be announced on Wednesday.

The partially convertible currency fell to 75.4250 a dollar, down from its previous close of 75.12. This is the lowest since October 12.

The rupee lost the most in the region, falling 0.338 per cent. The dollar index, which measures the greenback’s strength against major global currencies, rose 0.11 per cent to 96.2240.

“Since July 1, this is the third time the USDINR spot has closed above 75.40 levels. The last two times, there was no follow-through, but if the risk aversion persists, then USDINR can see further upside on the back of FPI outflows and corporate dollar demand,” said Anindya Banerjee, deputy vice president, currency derivatives and interest rate derivatives at Kotak Securities.

Banerjee expects the rupee to trade in the range of 75.20 and 75.70 in the near term.

The rupee has witnessed some volatility in November and December as the US Federal Reserve members sounded increasingly hawkish on inflation and taper.

To stem some of the volatility, the RBI sold dollars in the markets, showed recent data. The RBI sold a net $2.7 billion in the currency market for the week ending November 26.

According to Amit Pabari, managing director of CR Forex, the rupee could be under pressure in the coming days as trade deficit, and Fed’s increase of monthly taper plan “could further upset the sentiment for the foreign portfolio investors, and hence outflow could be seen.”

However, the initial public offerings and corporate borrowings would bring dollars onshore.

“December would be having a little higher volatility despite lesser trading days and global off due to the Christmas party mood,” said Pabari.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor