Rupee hits all-time low

Mumbai: Rupee hit an all-time low against the US Dollar on Monday, bringing further bad news for the economy that is already reeling under high inflation. The Rupee dropped 51 paise to an all-time low of 77.42, surpassing the previous low of 77.05 in March, according to the latest quote.

The Rupee has been staggering since the beginning of the year. Foreign funds have pulled out $17.7 billion from Indian equities this year already.

The flight-to-safety trades have pushed the dollar strength, with bids for the greenback accentuated since Russia attacked Ukraine late in February on supply disruption fears leading to runaway inflation and higher global interest rates, bringing forward the next recession.

The dollar scaled close to its two-decade highs, gaining for a fifth consecutive week after the Federal Reserve hiked its benchmark funds rate by 50 basis points and strong jobs data on Friday, there reinforced bets on further big hikes.

The rate futures market is pricing in a 75 per cent chance of a 75 basis-point lift-off in June and a further 200 basis points of hikes this year.

US inflation data this week and several Fed policymakers scheduled to speak will keep the hawkish rhetoric in place as the Russia-Ukraine in its third month shows no signs of letting up, boosting expectations for the dollar to be well-bid.

The net capital outflows have not helped the Indian currency, with foreign investors pulling out over Rs 6,400 crore from the Indian equity market in the first four trading sessions in May and remaining net sellers for seven months to April 2022.

That has weighed on the Indian currency when international crude prices have risen sharply and traded above $100 on average for the third month on supply disruptions from the Russia-Ukraine war.

The widening trade bill as the country imports 85 per cent of its oil needs, a stronger dollar, elevated crude prices, surging inflation and expected tighter monetary policy have spooked investors.