Rupee plunges to all-time low of 77.42 against US dollar
Extending its losses, the Indian rupee touched an all-time low of 77.42 against the US dollar in early trade on Monday. At the interbank foreign currency market, the rupee plunged 52 paise to hit a low of 77.42 against the US dollar. It closed at 76.90 on Friday. This has been attributed to high crude oil prices and uncertainty over the Russia-Ukraine war's duration.
Why does this story matter?
The sharp rise in crude oil prices in the international markets has led the Indian currency to weaken over the last few months. In March, it had touched a record low of 76.9812 against the USD. With Brent crude oil currently trading at $113, India's trade and fiscal deficits are expected to rise, increasing pressure on the Indian currency.
Weakness in global and domestic equities, rising bond yields
Weakness in global and domestic equities and concerns over rising bond yields led to the Indian currency to plunge, PTI quoted Sriram Iyer, a senior research analyst at Reliance Securities, as saying. Meanwhile, forex traders said aggressive rate hikes by the global central banks triggered by increasing concerns about inflation have dimmed the appeal of riskier emerging markets like India.
Stronger USD, rebound in oil prices
CR Forex Advisors MD Amit Pabari has listed some reasons for the rupee touching an all-time low. "We are victims of that time when the rupee is hitting an all-time low... To describe a few points—a stronger USD, weaker Asian currencies, rebound in oil prices, ongoing Russia-Ukraine war, FII (Foreign Institutional Investors) outflow, and a surprise hike by the RBI to tackle inflation."
Sensex, Nifty plunge following global cues
Meanwhile, the benchmark Sensex fell 823.08 points on Monday because of heavy selling pressure on the power and metal stocks. The 30-stock S&P BSE Sensex was trading 823.08 points, or 1.5%, lower at 54,012.50 points at 9:35 am. On the other hand, the broader NSE Nifty 50 was trading 1.32%, or 216 points, lower at 16,195.25 points.
Hawkish stance by the US Fed, RBI rate hikes
VK Vijayakumar, the chief investment strategist at Geojit Financial Services, has also commented on the current situation in the financial markets of India. "Hawkish stance by the Fed (US Federal Reserve), rate hikes by the RBI (Reserve Bank of India)... have created an atmosphere of risk-off for equities," he said. "And we don't know how long this will last," Vijayakumar added.
Asian stocks declined on Monday
After American stock futures fell on fears of additional policy tightening from the US Federal Reserve as well as worries about a strict COVID-19 lockdown in Shanghai impacting global growth, Asian stocks also declined on Monday, reported Reuters.
