The Indian rupee touched a new record low mark of 80 against the U.S. dollar today. Sentiment has been hit hard for the rupee as an unusual surge in U.S. inflation secured expectations that the Federal Reserve would hike policy rates by a record margin later this month and make the dollar the highest returning safe haven currency.
The rupee fell to 80.02 in morning trade against the U.S. dollar. For the month, the Indian unit is down 1% percent and has lost 5 percent so far in FY23. The dollar index, which measures the greenback against a basket of six currencies, hit a high of 108.58 a level last seen on Oct 2002, against 108.07 at the previous close, according to Bloomberg data.
The RBI intervenes in the forex market to hold volatility in the rupee’s exchange rate. According to dealers, the central bank has been intervening in the spot and forwards market regularly to stem the rupee’s decline. India’s foreign exchange reserves fell $5 billion from $593.3 billion in the week ended June 24. In its financial stability report released on June 30, the RBI said the current level of reserves is sufficient to meet nearly 10 months of imports projected for the current year.
The weakness in the rupee comes despite the Reserve Bank of India (RBI) declaring measures on July 6 to boost forex inflows and relieve pressure on the rupee’s exchange rate. These included greater freedom for banks to raise foreign currency deposits from non-residents and moving a cap on foreign portfolio investors’ short-term investments in government and corporate debt.
