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Rupee hits fresh record low, weakens past 78 a dollar on global equity slump, inflation worries

FII's sold $23.87 billion in domestic equities so far this year amid higher crude that continues to stock worries about higher inflation and fiscal deficit.

June 13, 2022 / 10:14 AM IST

The Indian rupee on Monday weakened beyond the 78 mark for the first time to hit a fresh record low against the US dollar, tracing losses in global equities and currency markets. The continuous outflows by foreign investors into the local equities and surging crude oil also dampened the sentiment.

At 10am, the domestic currency was trading at 78.22, down 0.48 percent from its previous close. The home currency opened at 78.12 and hit a fresh all time low of 78.28 a dollar.

FII's sold $23.87 billion in domestic equities so far this year amid higher crude that continues to stock worries about higher inflation and fiscal deficit.

Global markets plunged after Friday's inflation shock raised speculation of a more aggressive rate hike by the US federal reserve, which meets this week.

US consumer price inflation increased 8.6 percent from a year earlier, surpassing the 8.3 percent forecast by analysts, US Labor Department data showed.

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The Federal Reserve will meet on Wednesday and it is expected to continue raising the key policy rates, while the Bank of Japan is likely to keep its super-loose stance when it concludes a two-day meeting this Friday.

India will announce its consumer price inflation later today. India's headline retail inflation rate is seen falling to 7.1 percent in May, with a favourable base effect likely to more than cancel out the impact of a sizable increase in prices of key items. According to a Moneycontrol poll of 10 economists, Consumer Price Index (CPI) inflation likely fell sharply last month from a 95-month high of 7.79 percent in April.

Among Asian currencies, South Korean won fell 1.5 percent, Indonesian rupiah dropped 0.85 percent, Taiwan dollar and Philippine peso lost 0.6 percent each, Japanese yen, China renminbi and Malaysian ringgit fell 0.4 percent each.

"The USD/INR had been trading in narrow ranges for the last three weeks and had been gradually grinding higher over the last 3-4 sessions. The RBI has been intervening to prevent runaway depreciation of the rupee and to contain volatility," said IFA Global in a note to investors.

"The USD/INR implied spot broke past the 78 mark in offshore trading on Friday after the US CPI print. Today's move would encourage speculators and test the resolve of the RBI to continue intervening. The RBI may allow the rupee to adjust given the broad dollar strength," IFA Global said.
Ravindra Sonavane
first published: Jun 13, 2022 10:14 am
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