Rupee slumps to all-time low of 77.50 as high inflation triggers rate hike fears | Economic news
Mumbai: The rupee plunged 25 paise to close at an all-time low of 77.50 against the US currency on Thursday as the dollar hit a new two-decade high in global markets on strong sentiment risk aversion and higher-than-expected US inflation raise fears of aggressive rate hikes.
The local currency also hit its record intraday low of 77.63 to the dollar as domestic equity losses, concerns over weak growth and lingering currency outflows negated the impact of a slump in oil prices. raw.
In the interbank forex market, the rupiah opened sharply lower at 77.52 against the greenback and moved into a range of 77.36-77.63 in day trade.
The rupiah eventually ended at 77.50, down 25 paise from its previous close of 77.25, snapping its two-day winning streak.
Previously, the National Unity closed at a record low of 77.44 against the greenback on May 9.
“The Indian rupee registered a vital low of $77.63 to the dollar on a stronger dollar index and risk aversion sentiments. Investors sought safe-haven assets with higher inflation and interest rates. interest have raised concerns about growth,” said Dilip Parmar, research analyst, HDFC Securities.
The dollar index, a basket of six currencies, marked a new two-decade high of 104.51 on high retail price inflation.
The dollar’s bull run may continue with no sign of relief from the Chinese yuan and soaring inflation keeping the central bank in the spotlight, he added.
Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services said: “The Rupee fell to fresh all-time lows today as the Dollar continued to strengthen. But losses remained limited as the RBI stepped in to reduce volatility. WE.”
Global equity markets also fell after higher-than-expected US retail price inflation of 8.3% for April stoked fears of aggressive rate hikes by the US Federal Reserve.
India’s retail inflation also hit an eight-year high of 7.79% in April due to rising fuel and food prices as the Russian-Ukrainian war pushed up commodity prices. raw.
Inflation remained above the RBI’s 6% comfort level for the fourth consecutive month, which could prompt the central bank to raise interest rates further during the policy review money next month.
Worried about rising inflation, the RBI surprisingly raised the repo rate by 40 basis points to 4.40% last week.
Meanwhile, industrial production growth remained subdued at 1.9% in March compared to a year ago, mainly due to the poor performance of the manufacturing sector which showed the staggered impact of the third wave of the pandemic.
On the domestic stock market front, the BSE Sensex ended down 1,158.08 points or 2.14% at 52,930.31, while the broader NSE Nifty fell 359.10 points or 2.22 % to 15,808.
Foreign outflows also weighed on the rupee. Foreign institutional investors remained net sellers in the capital market on Thursday as they unloaded shares worth Rs 5,255 crore, according to stock market data.
Brent futures, the global oil benchmark, fell 2.32% to $105.02 a barrel.
US brokerage Morgan Stanley on Wednesday slashed its estimate of India’s growth by 30 basis points for 2022-23 and 2023-24 on global headwinds and warned that macro stability indicators like inflation are expected to “get worse” in the future.
Tighter policy rates by major central banks, including the RBI, would negatively impact demand over the next 6-8 months and slow the recovery process, the sources said.
Besides the Reserve Bank of India (RBI), several central banks, including the US Federal Reserve and the Bank of England, have raised their benchmark lending rates to contain inflation, which has been exacerbated by the Russian-Ukrainian conflict. .