The Indian rupee fell to a fresh all-time low of 77.43 against the U.S. dollar on Monday as raised crude oil prices, inflation fears, interest rate hikes and weak domestic equities weighed on investor sentiments. Risk aversion in international markets, dollar strength reduced demand for riskier assets, pull the local unit lower. The rupee decreased as much as 0.7% to 77.43 against the greenback, slipping past the previous all-time low of 76.98 touched in March this year.
Market sentiments are also hurt as investors are worried over increasing inflation, monetary policy tightening across major countries in the worldwide, economic slowdown and growing geopolitical tensions. Additionally, the expanding trade bill as the country imports 85% of its oil needs, has afraid investors.”Market contributors fear that increasing crude oil prices will hurt India’s trade and current account,” said ICICI Direct.
“We are victims of that time when the Rupee is touching an all-time-low due to various reasons. To describe a few points- a stronger USD, weaker Asian currencies, rebound in oil prices, ongoing Russia-Ukraine war, FII outflow, and a surprise hike by the RBI to tackle inflation could be the major reasons behind the same,” said, Amit Pabari, Managing Director, CR Forex Advisors.
Recently, RBI increased rates by 40 bps and hiked CRR by 50 bps. On the other hand, the Fed in its policy statement raised rates by 50 bps and said that its $9 trillion balance sheet would be allowed to decline by $47.5 billion/month in June, July and August and the reduction would increase to as much as $95 billion/month in September. The Bank of England also raised rates by 25 bps to 1%. These rate hikes have also led to Rupee depreciation.