Indian rupee hits all-time low against US dollar, breaches 81-mark
The Indian rupee on Monday fell to a new record low of 81.55 versus the US dollar for the first time ever, NDTV reported, citing interest rate hikes in the US and inflation worries. The US dollar has surged to multi-year highs versus most major currencies, according to the report. In early trade, the domestic currency also plummeted by 38 paise versus the dollar.
Why does this story matter?
Earlier this year, the sharp rise in crude oil prices in global markets following the Russia-Ukraine crisis led the Indian currency to weaken. At the time, it touched a record low of 76.9812 against the USD in March. Currently, the decline in its value is due to a continuous rise in interest rates by the US and a decline in India's foreign exchange reserve.
Tough trading sessions for Indian rupee
Reportedly, the Indian rupee was trading at 81.52 per USD at 9:20 am on Monday, down 0.64% from its previous close of 80.99 (Friday). This was the eighth of the nine trading sessions in which the domestic currency fell, losing about 2.28% in nine days. It is unclear whether Reserve Bank of India (RBI) intervened in currency markets on Monday to aid the INR.
Why is Indian rupee's value plummeting?
According to analysts, the Indian rupee fell as the US dollar index witnessed a rise. Jateen Trivedi, Vice President-Research Analyst at LKP Securities, told ANI that the latter has seen robust buying "as a strong hedge against interest rate hikes and inflation cycle." "The rupee downtrend will continue as long as positive triggers are not witnessed from the inflation forefront," added Trivedi.
Some respite expected next week, say experts
Experts believe that the RBI is also likely to increase interest rates later this week. They, however, said it was not still clear how much the hike would be. "The next trigger for the rupee next week is the RBI policy which shall provide some respite to the rupee fall. The rupee range can be seen between 80.50-81.55 before RBI policy," Trivedi noted.
All eyes on RBI to cool high inflation
Sriram Iyer, Senior Research Analyst, Reliance Securities, said the rupee would continue to remain weaker due to continuous interest rate hikes by the US Federal Reserve. "Focus now shifts to RBI's meeting this week, with its decision due on Friday. We expect RBI to hike rates by 50 bps to cool stubbornly high inflation and prevent the currency from weakening further," he told PTI.
Meanwhile, BSE Sensex fell 1.37%
On the other hand, reports on the local equities markets said that the broader NSE Nifty slid 260.80 points or 1.51% to 17,066.55 points, while the 30-share BSE Sensex was trading at 57,301.19 points, down 797.73 points or 1.37%. The country's foreign exchange reserves, meanwhile, fell by $5.219 billion to $545.652 billion for the week ending September 16, said reports.
