The Indian rupee has breached the 77 mark as it hit Rs 77.56/$1, a lifetime low for the currency. Recently, the rupee hit another record of Rs 76.98/$1 in early March. It closed at Rs 77.37/$1 yesterday.
The US dollar index, which measures the currency against six major currencies, broke past the 104 level and was near 20-year highs at 104.07. The index, which has jumped 8%, so far in 2022, had closed at 103.79 in the previous session.
The main factor driving down the rupee is the surge of the US Dollar globally on account of a 50 bps rate hike and its guidance on the upcoming rate hikes. The rise in US Treasury yields has contributed to the strength in US Dollar globally as the yield of the 10-year US Treasury note climbed 14 bps in the last few days.
According to dealers, weakness in equities has also dragged our currency down. Higher rates in the US have dimmed the risk appetite of investors as the weakening rupee is killing the returns of FIIs. This could be a reason for the major sell-off from the FIIs. They have sold equities amounting to Rs 1.3 lakh crores in 2022 so far.
India imports several important things and a weakening rupee will only serve to worsen the rising inflation. Inflation has already surged beyond 6% for the past three consecutive months and the rate in April is suspected to have breached 7%. A high of Rs 77.46/$1 has been breached before turning back as it trades around Rs 77.30/$1 presently.
Article by Aman Agarwal.
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