The Rupee weakened on Monday against the Dollar, gaining strength against major global currencies in the wake of possibility of more frontloaded rate hikes by the US Fed to curb inflation.
The Indian unit (INR) closed 9 paise weaker at 79.87 per US Dollar (USD) against the previous close of 79.78.
A senior US central bank official noted over the weekend that that it is a toss up between 50 and 75 basis points hike at US Fed’s upcoming meeting next month.
With the USD Index (DXY), which is a geometrically-averaged calculation of six currencies weighted against the USD, rising beyond 108, the greenback gained strength.
Sensing the weakening trend in the Rupee, importers rushed in to buy Dollars, which led to INR touching an intraday low of 79.92 per Dollar.
However, the central bank’s intervention ensured that the rupee is pulled back. Forex dealers said there were also some FPI inflows into the Indian financial markets notwithstanding the fact that the BSE Sensex closing 1.46 per cent down.
Kotak Mahindra Bank, in a report, said: “We expect USDINR to trade between 79-80 range in the near term, with a likely risk of overshoot of the 80-mark given the adverse global cues and market jitteriness ahead of Jackson Hole meetings. However, we expect RBI to intervene heavily to cap the sharp depreciation.”