Record low: US Fed fee hike jitters ship Re to brink of 80/$

Continuing its downward march, the rupee on Thursday closed at 79.88 towards the US greenback to hit a brand new low with the steep rise in US inflation stoking hypothesis of the US Federal Reserve mountaineering rates of interest by 100 foundation factors at its assembly this month.

The home forex, which had closed at 79.63 at its earlier shut, slipped to a low of 79.97 intraday earlier than closing decrease at 79.88 on Thursday.

“The rupee has rolled down to another record low of 79.97 as the unabated red-hot inflation data in the US has raised the case for a full percentage point rate hike at the Fed’s meeting later this month, given the Fed chair’s stance that inflation must be brought down as quickly as possible,” stated Sugandha Sachdeva, vp, Religare Broking Ltd.

US annual client costs jumped by a scorching 9.1 per cent in June, the very best in 4 a long time, topping expectations of an 8.8 per cent rise. The aggressive coverage course by the US Federal Reserve to curb rising value pressures is exacerbating fears of a weakening world progress outlook and resulting in danger aversion within the markets.

Besides, there was a relentless rise within the greenback index, whereas the euro has been hit arduous because it tumbled beneath parity towards the greenback for the primary time in virtually 20 years. Europe is grappling with an power provide crunch, owing to sanctions on Russia, which make it extra inclined to recession dangers. This has led to an enormous second depicting power within the buck, as markets expect the US Fed to boost charges extra swiftly than its friends.

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When rates of interest rise within the US, world funds want to drag out from rising markets like India and put money into US markets. Foreign buyers pulled out Rs 51,422 crore from home markets in June and Rs 8,685 crore in July to date.

Going ahead, it stays to be seen whether or not the one forex can maintain across the psychological parity stage and regain some misplaced floor. All eyes will now be on the European Central Bank assembly lined up subsequent week, which can present additional cues in regards to the rupee-dollar change fee.

Meanwhile, the Sensex closed 98 factors down at 53,416.15 on Thursday. “Tracking weak cues in global markets, Indian indices gave away their initial gains amid concerns over higher-than-expected US inflation data. Investors are increasingly expecting the Fed to carry out a minimum 75 bps rate hike this month in order to combat high inflation. On the domestic front, India’s WPI inflation moderated in June although it remains at the elevated levels, but is expected to ease further during the year,” stated an analyst.