INR hits all-time low | India’s Foreign Ex reserves fall below $600 billion

The rupee could breach the 77/$-mark if investors continue to rush to safe haven assets amid expected widening of India’s current account and the RBI’s limitations to intervene in the currency market.

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The rupee (INR) ended the day at 76.93/$, dropping 67 paisa or 0.87 per cent from its previous close. The rupee opened weaker on Friday, at 76.64/$ as compared to previous close of 76.26, in the wake of sharp fall in US equities as the treasury yields moved up with investors rushing for safe haven assets resulting in strengthening of dollar. Crude prices retreating to around $110/bbl added pressure on rupee as the country imports more than 80 per cent of its oil requirements.

It slipped to 76.97/$ during intra-day deals on Friday, hitting its all-time low before rebounding following a possible intervention by the Reserve Bank of India (RBI). The country’s foreign exchange reserves, too, dropped to $598 billion for the week ended April 29, down from its all-time high of $642 billion in the week ended September 3, 2021, latest RBI data showed.

FIIs continues to pull out from Indian market, trimmed their stake in NIFTY 500 – Check the news, one of the primary reason for the INR to go down.

The previous all-time low was on March 7 when rupee ended at 76.97/$.

As the world markets got spooked up due to a forecast of 10 per cent inflation by the Bank of England, dollar index rose from 102.5 to 104.06, Asian currencies were all down against the dollar, equities fell and news of frauds at Axis Mutual fund kept dollar rupee at 76.9 levels near its all-time low after it touched 76 yesterday (Thursday),” said Anil Kumar Bhansali, head of treasury, Finrex Treasury Advisors.

Rupee has depreciated 1.5 per cent in the current financial year.

“The RBI was there protecting the depreciation of rupee though on a low-key between 76.7 and 76.95 levels. FIIs remained the main buyers of dollars apart from oil companies, as oil hovered around $113 a barrel,” Bhansali said.

source : rbi.org.in

The RBI has been intervening aggressively in the foreign exchange markets by selling dollars, which resulted in the foreign exchange reserves dip.

The latest data for the April 29 ending week from the Reserve Bank of India (RBI) released on Friday showed the country’s FX reserves fell by $2.695 billion to $597.728 billion, marking the eighth straight week of declines. The last time the country’s import cover fell below the $600-billion-mark was during the week ending May 28, 2021.

India’s forex reserves have declined nearly $34 billion, or about 5.4 per cent, since Russia invaded Ukraine on February 24. That import cover wiped out in just two months is about what the country took to build in a year.

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With trade deficit widening, analysts predict the country is heading for a double-digit deficit in balance of payments for the current financial year, which is a negative for the Indian unit. An analysis by Standard Chartered Bank economists showed import and export values had both reverted to — or exceeded — pre-Covid levels as of end-FY22.

Check out the BofA Securities report on FII stake in Indian market.

“We expect a current account deficit of 2.5 per cent of GDP and a BoP deficit of $10bn in FY23, see risk of wider deficits,” the Standard Chartered report said.

The rupee could breach the 77/$-mark if investors continue to rush to safe haven assets amid expected widening of India’s current account and the RBI’s limitations to intervene in the currency market. “Rupee fell to the lowest level since March 2022 as the broad strength in the dollar continued to weigh on major crosses. We expect the USDINR (Spot) to trade sideways with a positive bias and quote in the range of 76.4 and 77.2,” said Gaurang Somaiya, forex & bullion analyst, Motilal Oswal Financial Services.