Home / Markets / Stock Markets /  Rupee dives to record low against US dollar today

Indian rupee fell sharply today after the US Fed chief indicated high interest rates will continue for some time to curb inflation. The rupee fell to record low of 80.11 vs USD, compared with the previous session's close of 79.87. On Friday, Federal Reserve Chair Jerome Powell at the Jackson Hole meet of central bankers signalled that restrictive policy would be kept longer to bring down inflation. Domestic equities also dived with Sensex falling over 1,200 points, tracking a global selloff.  

The rupee had hit previous all-time low of 80.06 last month. The US dollar is up over 7% against the rupee so far this year. 

"It was one of the most unambiguous, short, and blunt hawkish speeches you could hear from Powell. During eight-minute, 28-second (6-page) speech in Jackson Hole he focused on price stability. He said that restoring price stability will take some time but 2% is the *'overarching' focus now and will require using our tools 'forcefully'. However, there would be "some pain" for households and businesses as it will take time for the Fed to control inflation, but a failure to restore price stability would mean 'far greater pain'," said CR Forex Advisors in a note. 

"In forex pack, US dollar index tested 20-year high, Euro and Pound fell near their record lows. Asian currencies are trading with a loss of 0.30%- 0.50%. The Yuan tested a 2-year low. The likely range for USD-INR for the day would be 79.70 to 80.30," the forex advisory firm added. 

Asian equities were deep in red, tracking the Friday's selloff on Wall Street. The S&P 500 Index plunged 3.4% on Friday and futures indicated another 1% fall for the US gauge.

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said: "Markets expected Powell to remain hawkish at Jackson Hole but the ultra-hawkish tone of the Fed chief's message and his warnings that Fed's policy will "cause some pain to households and businesses" and this is "the unfortunate costs of reducing inflation" were not expected and factored-in by the markets. The sharp rise in the Dollar index above 109 and the 10-year bond yield spiking to 3.1 % are negative for capital flows to EMs like India. FPIs are unlikely to continue buying in India in this scenario."

The US central bank has already hiked its key overnight interest rate four times this year to control the worst inflation in decades. Fed policymakers meet next month to decide on monetary policy. Higher interest rates increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.

INR-Rupee technical levels

“Now, it would be all about RBI’s ‘Tolerance’ or ‘Intolerance’ of these record levels. If they think to curb the same, then we could see USD-INR easing up to 79.70-80 levels or else pressure will take the pair towards 80.30 levels. For confirmation of the technical breakout, one should wait for initial hours and check whether the pair is holding 80.05 or not. For the short term, if the pair closes above 80.05 convincingly then the breakout will set a target of 80.50-81.00 levels," CR Forex Advisors said in a note. 

 

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