Ahead of Budget 2023, Indian rupee falls below 82 against US dollar

The Indian rupee on January 31 fell below 82 against the US dollar, which the forex dealers attributed to a surge in the dollar index and foreign fund outflows from equities.

The last time the rupee plunged below the 82 mark against the dollar was on  January 10.

“Surge in the dollar index, foreign fund outflow and hedging demand ahead of the key event (union budget) pushed the rupee lower after the European markets open,” said Dilip Parmar, Research Analyst, HDFC Securities. “Foreign funds are aggressively selling the Indian equities.”

Foreign investors pulled Rs 23,159 crore from Indian equity markets as of January 30, according to the NSDL data.

“The dollar index also rose from 101.76 yesterday (January 30) to 102.60. A major UK-based bank was heard buying for equity outflows of FPIs,” said Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors LLP.

The rupee was trading at 82.04 against the dollar, as compared to 81.50 close on January 30.

Last year, the dollar appreciated against several currencies, including the rupee. However, the Indian currency has been one of the better-performing currencies worldwide but the modest depreciation it underwent may have added to the domestic inflationary pressures besides widening the Current Account Deficit (CAD).

The rupee also touched record low levels and breached the 83-mark for the first time in 2022. To defend this, the Reserve Bank of India (RBI) spent a lot of forex reserves to cushion the fall.

Since November, India’s forex reserves, however, barring some weeks. They stans at $573.73 billion.

“For FY23, India has sufficient forex reserves to finance the CAD and intervene in the forex market to manage volatility in the Indian rupee,” the Economic Survey, which was released on January 31, said.