INR VS Dollar: Rupee hits all-time low; why further downside is limited? Expert explains

After slipping by 26 paise against the US dollar in early trade, the rupee further depreciated and opened 31 paise lower to an all-time low of Rs 80.15 on Monday. The weakness in rupee weakness comes amid the strength of the American currency and firm crude oil prices.  

At the interbank foreign exchange, the rupee opened at 80.10 against the dollar, then lost ground to quote at 80.15, registering a fall of 31 paise from the last close. 

As per experts, rupee was under pressure due to US Fed Chair Jerome Powell's hawkish remarks during Jackson Hole symposium. They feel there is not much downside left and the Indian currency may bottom out soon.  

"The rupee is under pressure in today’s trading session due to the hawkish commentary of the Fed chairman announced at the Jackson Hole Economic Policy Symposium. The fight to tame inflation is expected to continue in the distant future and the rate hikes are expected to put pressure on the rupee and other emerging market currencies," said Santosh Meena, Head of Research, Swastika Investmart Ltd. 

However, Meena feels Indian currency is better positioned in comparison to currencies of other emerging markets (EMs) in the current scenario.  

He said due to the better-than-expected economic growth trajectory of India and less severity of inflation compared to its peers, INR has fared better than other currencies.  

Swastika Investmart Ltd Head of Research was of the view that the signs of Foreign Institutional Investors (FIIs) and Foreign Institutional Portfolio (FPI) returning are visible. "Thus, we expect the further downside of the INR to be limited. it might bottom out at around 80.5 to 81 levels," he said.  

Earlier, Anand James - Chief Market Strategist at Geojit Financial Services, had siad that after several rejection trades, the 80 mark is on the verge of giving away, setting up potentially strong up moves to 80.3. "Downside marker may be placed at 79.86 for the day," the expert said.  

On Friday, the rupee closed at 79.84 against the dollar. 

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.51 per cent higher at 109.35. 

Forex traders said the dollar index gained after Federal Reserve Chair Jerome Powell adopted a hawkish tone to battling inflation. 

Speaking on the spike in dollar index, V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the sharp rise in the dollar index above 109 and the 10-year bond yield spiking to 3.1 % are negative for capital flows to EMs like India.  

"FPIs are unlikely to continue buying in India in this scenario," he added.