Rupee faces more headwinds this week – Blue Barrows

(This story originally appeared in on Oct 10, 2022)

MUMBAI: The rupee could run into more rough weather this week as higher crude prices, rising geopolitical tensions and a hawkish US Fed weigh on the exchange rate. Reserve Bank of India’s recent approach of intervening very tactically on the side lines has given the impression that the central bank is willing to go with the flow.

“While the RBI was able to defend the Rupee successfully through the last round of simultaneous stress on current and capital account by spending it’s Reserves, this time around things are likely to be different. After having exhausted a significant portion of its Reserves, RBI seems concerned about the burn rate of Reserves and appears to be spending them very judiciously,” said IFA Global Research in a note.


On Friday the rupee closed at a lifetime low of 82.33. While the rupee has been an outperformer this year, depreciating less than most other currencies, last week it fell the most among major currencies.

Dealers said that the markets would be watching for minutes of the Federal Reserve Open Markets Committee Meeting on which will be released on Wednesday. The US government will also release data on consumer prices on Wednesday.

“One month offshore-onshore spread has risen to 10 paise, indicating speculators are betting against the Rupee….We expect the Rupee to remain under pressure on the coming week. We may see bouts of RBI intervention. We see a 82.10-83.25 range for the Rupee in the coming week,” said IFA Global.

Last week the rupee had come under pressure on the back of OPEC announcing production cuts and US jobs data coming in stronger than expected raising the prospects of a more hawkish approach by the US Federal Reserve. According to dealers a high terminal US Fed rate would mean that the value of RBI’s US treasury holding would fall even further. Earlier the RBI had said that around 65% of the decline in the value of forex reserves is due to the fall in value of non-dollar assets and depreciation of bond holdings.