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HomeBusinessRupee Hits New All-Time Low As Dollar Climbs To 20-Year Peak

Rupee Hits New All-Time Low As Dollar Climbs To 20-Year Peak

Rupee weakens to new record low of 80.4 per dollar

The rupee weakened to a new record low early Thursday as the greenback climbed to a new high in two decades after the US Federal Reserve raised interest rates and forecast a more aggressive policy path in the current tightening cycle.

Bloomberg listed the rupee at 80.4863 against the greenback after hitting 80.4875, a record low compared to the previous close of just below the psychologically important 80-per-dollar mark.

PTI reported that the domestic currency fell 42 paise in early trading to a new all-time low of 80.38 against the US dollar.

Forex traders said the strength of the US currency in the overseas market, a muted trend in domestic stocks, risky moods and firm crude oil prices weighed on the local unit, PTI said.

“Given broad dollar strength, the Reserve Bank of India may also be looking at revising its intervention function. We will likely see a range of 80.10-80.50 on Thursday,” IFA Global Research Academy told PTI.

The dollar hit a 20-year peak in safe-haven flows as the prospect of US interest rates rising further and faster than expected scared investors.

The dollar index — a measure of the dollar’s performance against six of its major counterparts — rose 0.2 percent to a 20-year record high of 111.72, up 2 percent this week and about 17 percent this year. .
“After an initial period of volatility in the first few hours after the Fed rate hike, the market has clearly sided with the US dollar, which offers better carry and a safe haven amid fears of downside growth in the US and the world is getting bigger,” David Croy, a strategist at Australia & New Zealand Banking Group, told Bloomberg.

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According to Bloomberg, sentiment was dealt an additional blow by Russia’s escalation into the war with Ukraine and tensions between Beijing and Taiwan.

After Russia’s first mobilization of reservists since World War II, the euro plunged to a 20-year low of $0.9807.

The Australian, New Zealand, Canadian, Singaporean and Chinese currencies fell to their lowest level in two years, while the value of the British pound fell to its lowest level in 37 years. As investors waited for a meeting of the Bank of Japan, the yen was close to its 24-year low.

“The Fed is not going to stop anytime soon, and there will be an extended period of restrictive monetary policy for at least next year,” Sally Auld, chief investment officer at asset manager JB Were in Sydney, told Reuters. .

“What are you buying right now besides the US dollar?” she added, citing growth clouds over Europe, Britain and China and the weakness of the yen as Japan keeps interest rates low.

As investors priced out the possibility of a “soft” economic landing and prepared for damage to longer-term growth, the US yield curve widened its inversion, selling short-term treasuries and raising long-term interest rates.

“The likelihood of a soft landing is likely to diminish to the extent that policy needs to be more restrictive, or restrictive for longer,” Fed Chair Jerome Powell told reporters after announcing the rate hike.

Jerome Powell announced that the Fed was “determined” to bring inflation back to its target of 2 percent and promised the Fed will do so. He added that “we will continue with it until the job is done.” The phrase was a play on the memoir “Keeping at It” by former Fed Chairman Paul Volcker.

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“On Asia, I think the outcome of the Federal Reserve is likely to keep risky assets under pressure,” Clara Cheong, a global market strategist at JPMorgan Asset Management, told Bloomberg Radio. “It could especially hurt export-oriented companies through the effect of a strong dollar.”

South Korea’s profits fell past the 1,400 greenback threshold for the first time since 2009, and the yuan even weakened as China set its reference rate for the currency stronger than expected for a record 21st day.

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