The rupee touched 80.0600 against the dollar shortly after the trade began, according to Bloomberg data.
High inflation and interest rates in the U.S., along with fears of an imminent recession in the world’s largest economy, have driven the dollar higher in recent weeks at a time when investors are trying. Avoid hazards.
The tightening of US monetary policy has fueled capital outflows from emerging markets such as India; Foreign investors have withdrawn a net $30.8 billion in debt and equity this year.
Data released last week showed U.S. consumer price inflation hit a new high in June, the highest in four decades, beating market estimates and bolstering expectations that the Federal Reserve will raise interest rates significantly next week.
In a written statement to Parliament on Monday, Indian Finance Minister Nirmala Sitharaman attributed the rupee’s sharp depreciation to external factors.
“International factors such as the Russia-Ukraine conflict, rising crude oil prices and tightening global financial conditions are the main reasons behind the fall of the Indian rupee against the US dollar,” he said.
However, he added that the Indian currency has improved against the British pound, Japanese yen and euro in 2022.
However, rising crude prices have led to a worsening trade balance in a country that imports 80 percent of its oil needs.
India’s merchandise trade deficit widened to a record $26.18 billion in June, official data revealed last week, mainly due to higher import costs for crude and coal.
In its monthly economic review, the finance ministry said rising import costs would widen the current account deficit and depreciate the rupee further.
Consumer price inflation in India, the world’s sixth-largest economy, eased slightly to 7.01 percent in June, after hitting an eight-year high of 7.79 percent in April.
But despite interest rate hikes in May and June, inflation remained above the central bank’s 2 to 6 percent target.
Also, the central bank sold more than $34 billion of foreign exchange reserves in hopes of maintaining the stability of the rupee.
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