The Indian rupee plunged to an all-time low in opposition to the buck on Monday, as US financial coverage tightening roiled sentiment and international buyers continued to dump home shares.
Rising oil costs and a strengthening US greenback have weighed heavy on the rupee with a shock price hike by the Reserve Financial institution of India (RBI) final week doing little to stem capital outflows.
The rupee fell previous its earlier report low of 76.98 in opposition to the US greenback in March to 77.56 on Monday.
The autumn got here as Indian shares on the benchmark Sensex and Nifty50 indices prolonged losses for a fourth day, falling multiple p.c every on Monday earlier than recovering floor later within the day.
Banks, metals and oil and gasoline shares declined essentially the most, with market heavyweight, the conglomerate Reliance, shedding greater than 3.0 p.c following its quarterly outcomes reported late on Friday.
Overseas buyers have withdrawn a web 1.34 trillion rupees ($17.3 billion) from Indian equities thus far this yr, inventory change information confirmed.
The battle in Ukraine and resurgence of Covid-19 restrictions in China have exacerbated outflows from rising markets like India as international funds flip risk-averse.
Inflation worries on the again of rising commodity costs have additionally soured sentiment in Asia’s third-largest financial system, which imports greater than 80 p.c of its oil wants.
Shopper worth inflation in India hit a 17-month excessive of 6.95 p.c year-on-year in March, and economists count on information to be launched later this week to indicate that quantity rising past seven p.c in April.
The US Federal Reserve final week hiked the important thing lending charges by half a share level, but in addition held off on signalling extra aggressive measures.
“After an unscheduled price hike by the Reserve Financial institution of India, if India’s inflation strikes larger than 7.0 p.c… the strain will likely be on for the RBI to behave once more,” foreign exchange agency OANDA’s Jeffrey Halley mentioned in a observe.
“That will give some power to the rupee however is unlikely to be bullish for native equities.”
India’s foreign exchange reserves declined for an eighth consecutive week, slipping under $600 billion within the week ending April 29 because the central financial institution offered international foreign money in an effort to stabilise the rupee.