Guwahati: The Indian rupee continued to fall precipitously against the US dollar, hitting a new record low of 82.66 on Monday. The US jobs report was strong, solidifying expectations for further significant Federal Reserve rate increases and the rupee plunged from its previous low of 82.33.
The rupee has routinely set record lows in recent trading sessions due to worries about oil prices, rising government rates, FII outflows, and foreign demand for the US currency. In contrast to earlier instances, the Reserve Bank of India (RBI) has also been unable to arrest the continuous decline.
IFA Global, in a note said, “The double whammy of higher US rates and higher crude prices is back to haunt the Rupee. While the RBI was able to defend the Rupee successfully through the last round of simultaneous stress on current and capital account by spending its Reserves, this time around things are likely to be different. After having exhausted a significant portion of its Reserves, RBI seems concerned about the burn rate of Reserves and appears to be spending them very judiciously. This has resulted in Rupee adjusting and aligning itself with fundamentals and its peer group currencies.”
The week ending September 30 saw a drop in India’s foreign exchange reserves to $532.66 billion, the lowest level since July 2020. The reserves were reported to be $537.5 billion the week prior.
The price of oil dipped somewhat today following a lengthy rise that saw a nearly 4% increase on Friday to five-week highs. OPEC and its allies decided to reduce oil production, the biggest supply reduction since 2020, which has increased the price of crude amid worries about a recession and increasing interest rates.
“US jobs report that came out on Friday was solid with headline NFP print coming in line with expectations (263k v/s 275k expected). Unemployment rate dipped to 3.5% from 3.7% in August. Wage growth too was healthy at 0.3% MoM and 5% YoY. This disappointed investors who were looking for some signs of weakness in labor markets that could cause the Fed to pivot from its current stance of aggressive monetary policy tightening. This week focus will be on the US September CPI print due on Thursday and FOMC minutes due on Wednesday,” added IFA Global.
The Indian stock market plummeted early on Monday, wiping out investor money of Rs 3 lakh crore elsewhere. The Nifty50, which is more inclusive, lost about 200 points while the Sensex lost over 700 points.
According to a Reuter’s poll, data on India’s retail inflation, which is scheduled to be released on Wednesday, has likely accelerated to a five-month high of 7.30% in September due to rising food costs. A survey of 47 analysts found that the Consumer Price Index, which measures inflation, increased to an annual high of 7.30% in September from 7.00% in August.