Rupee falls to new low against dollar
THE Indian rupee plunged to an all-time low against the greenback on Monday (9), as US monetary policy tightening roiled sentiment and foreign investors continued to dump domestic stocks.
Rising oil prices and a strengthening US dollar have weighed heavy on the rupee, with a surprise rate hike by the Reserve Bank of India (RBI) last week doing little to stem capital outflows.
The rupee fell past its record low of 76.98 against the US dollar in March to 77.56 on Monday.
The fall came as Indian stocks on the benchmark Sensex and Nifty50 indices extended
losses for a fourth day, falling more than one per cent each on Monday before recovering ground later in the day.
Banks, metals and oil and gas stocks fell the most, with market heavyweight, the conglomerate Reliance, losing more than three per cent following its quarterly results report last Friday (6).
Foreign investors have withdrawn a net `1.34 trillion (£14 billion) from Indian equities so far this year, data from the stock exchange showed.
The war in Ukraine and the resurgence of Covid-19 restrictions in China have exacerbated outflows from emerging markets like India, as foreign funds turn risk-averse.
Inflation worries on the back of rising commodity prices have also soured sentiment in Asia’s third-largest
economy, which imports more than 80 per cent of its oil needs.
Consumer price inflation in India hit a 17-month high of 6.95 per cent yearon-year in March, and economists expect data to be released later this week to show that number rising beyond seven per cent in April.
“After an unscheduled rate hike by the Reserve Bank of India, if inflation moves higher than seven per cent... the pressure will be on for the RBI to act again,” forex firm OANDA’s Jeffrey Halley said.
“That may give some strength to the rupee but is unlikely to be bullish for local equities.”
India’s forex reserves also declined for an eighth consecutive week, slipping below $600 bn (£487bn) in the week ending April 29, as the central bank sold foreign currency in an effort to stabilise the rupee.