₹ slips 41 paise to 79.36; dollar index surges to 2-decade high

Rupee may sink to 82 against dollar in Q3, high trade deficits will be the norm now, says Nomura

- BHASKAR DUTTA

The rupee dropped to a new low versus the US dollar on Tuesday sentiment for the domestic currency took a turn for the worse after trade deficit hit a record high in June.

The rupee slumped 0.5 per cent to close at a fresh low of 79.36 per US dollar on Tuesday. The previous closing low for the rupee was 79.04 per US dollar on July 1. Unabated outflows of overseas investment from Indian equity markets added to the rupee's woes, with traders predicting fresh weakness for the currency going ahead, given the unfavourable outlook on the current account amid elevated oil prices.

"We see multiple headwinds, including weakening India BOP dynamics, aggressive Fed hikes and rising US recession risks, which should drive INR weakness in coming months, with USD/INR at 82 by Q3 2022 and 81 by Q4 2022," Nomura said a note.

Global oil prices, which have surged since the Ukraine war broke out in late February, hardened anew since last month as major producers made little headway with pushing up supplies amid firm demand. The rise in crude oil prices poses major upside risks to inflation and current account deficit, given that India imports more than 80 per cent of fuel needs.