Indian rupee drops, at risk of slipping below key level on risk aversion

The Indian rupee declined on Wednesday on risk aversion fuelled by the U.S. credit rating downgrade, putting the currency at risk of slipping below a key level.

The rupee was at 82.47 to the U.S. dollar by 10.54 a.m. IST, down from 82.2550 on Tuesday. U.S. equity futures and Asian shares declined following the U.S. credit rating downgrade, boosting demand for safe-haven dollar.

Asian currencies were down up to 0.8% while the dollar index inched up.

“Do not think the dollar’s move higher is sufficient to take it (USD/INR) to near 82.50, a level which is important in the current narrow range market,” an FX salesperson at a bank said.

“I suspect that there are importers who have been caught napping and possibly a bit of short positions exiting.”

Futures on the S&P 500 Index were down 0.5% after ratings agency Fitch on Tuesday downgraded the U.S. long-term foreign currency ratings to AA+ from AAA, reflecting likely fiscal deterioration over the next three years and repeated down-to-the-wire debt ceiling negotiations.

Analysts did not see a major impact of the downgrade on U.S. Treasuries, which will be a relief for the rupee and other Asian currencies.

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