Rupee slumps to fresh all-time low of 80.15 as US dollar touches two-decade peak on Fed’s hawkish stance The Indian Rupee breached the 80 per Dollar mark to hit a fresh record low on Monday while bond yields rose 6 bps, tracking the fall in global equities on the back of the US Federal Reserve chairman Jerome Powell’s hawkish rhetoric at the Jackson Hole event. The local currency was trading at 80.03 against the US dollar, down 0.25% from its previous close. At the interbank foreign exchange, the rupee opened at 80.07 and touched a record low of 80.13 a dollar. The 10 year bond yield gained 6 basis points to 6.27% from its previous close of 6.21%. Note that bond yield and prices move in opposite directions. Among Asian peers, South Korean Won declined 1.3%, Thai Baht lost 0.8%, Japanese Yen 0.64%, China Renminbi 0.6%, Taiwan Dollar 0.6%, Malaysian Ringgit 0.5%, Indonesian Rupia 0.43%, and Singapore Dollar 0.34%. In his statement at the Jackson Hole Symposium, the Fed Chairman said the US economy will need tight monetary policy “for some time” before inflation is under control. He added that reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. As that pain increases, Powell said, people should not expect the Fed to dial back its monetary policy quickly until the inflation problem is fixed. Powell and other policymakers are signaling that even a recession would not budge them if inflation is not convincingly heading back to the Fed’s target. USDINR (Spot) to trade positive “Powell gave no indication on Friday of how high rates might rise before the Fed is finished, only that they will go as high as needed. Dollar rallied sharply after the Fed Chairman comments and this week’s non-farm payrolls data is likely to trigger further volatility for the greenback. We expect the USDINR (Spot) to trade positive and quote in the range of 79.70 and 80.20,” said Gaurang Somaiya , Forex & Bullion Analyst, Motilal Oswal Financial Services. Also Read: Reliance AGM 2022 LIVE: Mukesh Ambani’s succession, retail & Jio IPOs, new energy, 5G telecom plans, dividend Rupee may trade in 79.70-80.50 range over next 1-2 weeks “USDINR is on a strong wicket, with such a positive USD backdrop. A strong US Dollar Index, high US bond yields with a deeply inverted yield curve and weak equity markets all make it challenging for FPI and carry trade flows in EMs. However, the speed of the up move will be closely regulated by RBI. RBI has twin objectives of not letting the Rupee become a weak outlier and also, they do not want the USDINR to become too volatile. This means they may continue to sell USD as the spot and forwards moves to a fresh all-time high. However, this may not alter the trajectory of the pair and the path of least resistance would remain upward. We expect a range of 79.70 and 80.50 over the next 1-2 weeks,” said. Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities. (The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)
If the current trend continues for a longer period of time, not only oil mills but oilseeds growers will also not be able to get good rates of their produce, says Samir Shah, president of Gujarat State Edible Oils and Oil Seeds Association (GEOA). Shah who is also past president of SOMA says that due to various international factors rates of edible oils had gone up considerably, especially imported oils earlier this year.
“With a view to curb rising prices of edible oil, the Government of India reduced import duty on edible oils. Considering the fact that India is producing hardly 30 percent of its edible oil requirement, the decision was right at that point of time. Now when international prices of edible oils have gone down by 15 percent to 25 percent and high production period has started in edible oil exporting countries, the government should gradually increase import duty to protect local oil mills and oilseeds growers,” said Shah. GEOA has also made representation before Union Minister for Commerce & Consumer Affairs, Piyush Goyal to increase import duty.
In June import duty on edible oils was ranging from 35 to 55 percent, since then the government gradually reduced import duty and at present it is ranging from zero percent to 15 percent on different edible oils, he said.
Just a month back prices of edible oils were through the roof and the government took appropriate measures by reducing import duty in order to protect consumers, says Atul Chaturvedi, president of Solvent Extractors Association of India (SEA). “Prices of edible oils are coming down globally. Kharif sowing has already started across the country. In the interest of local farmers, it is high time to enhance import duty in a phased manner to encourage local edible oil value chain,” opined Chaturvedi.
On Thursday imported Palm oil prices were at around Rs 2100 per 15 kg as against local Rs 2700 and Rs 2550 of groundnut and cottonseed oils. Prices of other local oils including ricebran, coconut, soyabean and mustard remained as high as Rs 2350, Rs 2520, Rs 2500 and Rs 2580 respectively.
India imports around 13-13.5 million tonnes of edible oils, of which around 8-8.5 million tonnes (around 63 per cent) are palm oil. Though the price of other imported Sunflower oil remained at around Rs 2700 per 15 kg, but import quantity of the oil is much lower than that of palm oil.