Hawkish Fed, pound sell-off: Rupee at fresh low, markets tumble

The rupee closed 69 paise down compared to Friday’s close of 80.98 against the greenback.

The weakness in the rupee also affected sentiment of equity market investors, as the benchmark Sensex at the BSE tanked 953 points, or 1.6 per cent, to close at 57,145.22. The broader Nifty at NSE lost 311 points, or 1.8 per cent, to end at 17,016 on Monday. Foreign institutional investors offloaded shares worth Rs 5,101.30 crore, as per provisional data from the BSE.

“Rupee falls to fresh all-time lows as the dollar strengthens across the board. Hawkish Fed outlook, political instability in China and sell-off in pound after the tax cut announcement is also disturbing the overall market sentiment,” Gaurang Somaiya, forex & bullion analyst, Motilal Oswal Financial Services, said.

Last week, Finance Minister Nirmala Sitharaman said the rupee has “held back very well” against the US dollar when compared to other major currencies of the world.

“Since the US Fed’s hawkish rhetoric at the recent FOMC and increase in the terminal rate for this cycle, risk sentiments have weakened considerably, weighing on regional currencies and bonds, complicating policymakers’ inflation fight. Strong intervention presence had kept the USD/INR in a narrow 79-80 range in the run-up, but the pair has since swiftly risen to record highs above 81,” said Radhika Rao, executive director & senior economist, DBS Group Research.

Meanwhile, as per a Reuters report, Wall Street extended declines on Monday as investors continued to fret about the Fed’s aggressive policy tightening and its impact on the US economy. As of 12:41 pm ET, the Dow fell 1.06 per cent at 29,275.64, the S&P 500 by 0.99 per cent at 3,656.56 and the Nasdaq by 0.53 per cent at 10,810.87. Europe’s STOXX 600 index slipped to hit a new low since December 2020.