Rupee stabilises against US dollar after hitting a one-month low

The Indian rupee depreciated to a one-month low against the US dollar on February 15 after the US inflation data bolstered hopes of more interest rate hikes from the Federal Reserve. The local currency hit a low of 82.89 per dollar during the day, which was its lowest level since January 4.

The interbank order matching system saw incredibly low volumes of $4.15 billion, the lowest in the current year, amid a rangebound movement in the currency.

Stocks and currencies in the Asian markets saw some losses due to the US consumer inflation index’s data which surged to 6.4% in January as opposed to the street’s expectations of a rise to 6.2%. The US Fed also stated that the hikes in interest rates would continue and the interest rates would be between 5-5.5% by the end of the year.

Traders and investors are expecting another rate hike of 25 basis points (bps) in June. The rate hikes in March and May are being priced in by the money market.

However, the rupee stabilized on January 16 and was trading 21 paise higher near 82.62 against the greenback in early trade. The currency opened at 82.72 per dollar on the interbank foreign exchange before gaining some ground.

The gains in the domestic currency were supported by broad dollar weakness coupled with strength in Indian equities. Additionally, foreign fund inflows and upbeat domestic trade deficit data also supported sentiments.

As per the latest data released, India’s trade deficit in the month of January declined to $17.75 billion, a 12-month low. The total imports fell 3.63% YoY to $50.66 billion, while exports dipped 6.58% to $32.91 billion.

Meanwhile, as per the data available on the exchanges, Foreign Institutional Investors (FIIs) remained net buyers in the Indian capital market on February 15 as they net bought shares worth Rs 432.15 crore.

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The US dollar index measures the strength of the US dollar against a basket of 6 currencies. The dollar index saw some gains on Wednesday due to rising bond yields.