Amid fears of a global slowdown compounded by investors’ risk aversion to equity markets, Rupee tumbled to a new low on Monday. Reportedly, the Indian currency fell 38 paise to hit an all-time low of 81.47 against the US greenback.
Notably, the rupee had reached a low of 81.22 on Friday, prompting the Reserve Bank of India (RBI) to quickly sell dollars. Consequently, the rupee had a little breather.
The Indian rupee taking a beating comes in the backdrop of a hawkish US Fed hiking interest rates by 75 basis points to 3-3.25 per cent last week.
This was the third straight time that the Fed had announced a hike, primarily meant to arrest the sky-inflation rates in the country. However, it instantly lead to a mismatch in the global economies. The two major currencies in Asia, the yen and the yuan have tumbled as well due to investors fearing that the Asian market may experience crisis-level stress once again.
It is pertinent to note that most major currencies across the globe have been struggling and depreciating against the US dollar.
Speaking on the currency fluctuation, Union Finance Minister Nirmala Sitharaman last week stated that Indian Rupee ‘held up very well’ against the US dollar when compared to other currencies.
“If any one currency which has held its own and did not get into fluctuation or volatility as much as other currencies, it is the Indian rupee. We have held back very well,” said Sitharaman.
The RBI Monetary Policy Committee (MPC) meeting is scheduled to be held later this week. The investors are keeping a close eye on the developments that come from the meeting. However, the sentiment leading to the meeting is rather downbeat amongst the investors.
Experts believe that the rupee will tumble as risk-off sentiment takes the dollar index to 113.70 and sterling to 1.0557 against the dollar.
(With inputs from agencies)
