Rupee hits fresh record low of 78.29 amid risk aversion in markets, persistent FII selling, inflation concerns

The Indian rupee reached a new record low of 78.29 against the US dollar on Wednesday as persistent foreign fund outflow from the financial markets, particularly from equity markets, risk aversion in global markets put pressure on the native currency. The fall comes amid selling in emerging market equities and currencies ahead of the US Fed Chair Jerome Powell’s testimony to US Congress later in the day. According to foreign exchange analysts, the local unit has also been hampered by heightened concerns over India’s inflation and current account deficit and elevated crude oil prices.

“We continue to remain cautious on INR going forward, in light of weakening fundamentals and tough external environment. Situation like this, where tail (forward) might wag the dog (spot), warrants us to be more vigilant and cautious,” said Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities.

Rahul Kalantri, VP Commodities, Mehta Equities, said, “The aggressive interest rate hike plans of the U.S. Federal Reserve and continuous sell-off by the FIIs are exhibiting pressure on the rupee. Widening trade deficits and higher crude oil prices are also restricting gains of the rupee. We expect the rupee to remain volatile this week and could test its resistance level of 78.45.”

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