September 28, 2022

Rupee falls to record low against US dollar

The rupee fell to a record low against the US dollar

The Indian rupee fell sharply on Monday and touched the 80 level against the US dollar after Federal Reserve Chairman Jerome Powell’s hawkish speech.

At 11 am, the rupee was trading at 80.04, compared to a close of 79.86 in the previous trading session against the US dollar.

The rupee weakened to as low as 80.14 against the US dollar in the first few minutes of trading on Monday as the US dollar index strengthened past the 109 mark.

The lifetime low of the rupee was 80.06 per dollar on July 19.

“Jerome Powell’s hawkish speech from the Federal Reserve sent a bid on the US dollar and pushed global stocks and bond yields lower. Restoring price stability will likely require maintaining a restrained political stance for some time. Moving forward, it is clear from Powell and spokespeople at the Bank of Federal Reserve that the further path will depend on data,” said Kunal Soudani, Vice President of the World Trade Center, Shinhan Bank.

On Friday, Federal Reserve Chairman Jerome Powell indicated that the US central bank is likely to continue raising interest rates and keeping them high to tame inflation.

“Restoring price stability is likely to require maintaining a restrained political position for some time,” Powell said.

In a note, CR Forex said: “After the hawkish rhetoric, the probability of the Fed’s increase of 75 basis points in September jumped by 70 percent. The market rout led by Powell’s speech reduced the fortunes of American billionaires by $78 billion on Friday. In a FX package In the US, DXY tested a 20-year high, and the euro and pound fell near record lows. Asian currencies are trading at a loss of 0.30 percent – 0.50 percent. The yuan tested a two-year low, so the rupee is about to open at a record low At 80.10 the likely range for today will be 79.70 to 80.30.

The dollar index, which measures the strength of the greenback against a basket of six major currencies, was at 109.370.

Soudani added that given the sustainability of higher bond yields, DXY could test 109.77 levels, as EURUSD may test 0.9860 levels and GBPUSD will move towards 1.1680 levels.

Also, Brent crude prices seem to be a bit sticky, unable to stay at the lower levels. Looking at the above factors, USDINR may find strong support at 79.50 while a break of 80.06 levels, will affect option sellers hitting their stops and allow USDINR to move towards 80.60 levels.