HomeLatest NewsRupee hits record low, crosses 80 again against US dollar

Rupee hits record low, crosses 80 again against US dollar

Tracking the strength of the US dollar, the Indian rupee again crossed the psychologically important 80 mark to touch an all-time low of 80.11 in early trade on Monday.

At 10.43 am, the rupee traded at 80.020 covering some of the morning’s decline. On Friday, it closed at 78.87 per US dollar.

“The fight to contain inflation is expected to continue in the foreseeable future and rate hikes are expected to put pressure on the rupee and other emerging market currencies,” said Santosh Meena, head of research at Swastika Investmart.

The US dollar, the reserve currency of almost all countries, is detrimental to other currencies, especially during times of severe financial market volatility because it weakens peer currencies.

Even in mid-July, the rupee fell below 80 against the US dollar for the first time in July as higher crude oil prices boosted demand for the US dollar amid tight global supply.

The US dollar strengthened sharply today after US Federal Reserve Chair Jerome Powell said the central bank will not back down in its fight against rising inflation – which essentially means more interest rate hikes.

Powell said in a speech at the central banking conference in Jackson Hole, Wyoming, that the US economy will need tighter monetary policy “for some time” before inflation is brought under control.

The Federal Open Market Committee’s (FOMC) focus right now is on getting inflation back to its 2 percent target.

“These are unfortunate costs of reducing inflation. But failure to restore price stability will mean much more pain,” Powell said at the conference.

Against a backdrop of more than four decades of inflation, the US Federal Open Market Committee raised its key policy interest rate by 75 basis points to 2.25-2.50 percent in late July, expecting interest rate hikes to be “appropriate.”

Interest rate hikes generally reduce demand in the economy, thereby putting a brake on the rate of inflation. The US economy is going through a rough patch with high inflation and negative growth.

Meanwhile, Indian stocks fell sharply this morning following negative cues from global benchmarks which also eased after Powell’s monetary policy guidance.

Trimming some early trading losses, the Sensex and Nifty are currently trading around 1.5 percent lower from Friday’s close.

Domestic gold also traded weaker on Monday, pressured by a stronger US dollar and the hawkish US Fed’s monetary policy stance.

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