New Delhi: The Rupee reached a record low at 81.51, sinking 52 paise against US Dollar on Monday. The all time low Indian Rupee comes in the backdrop of a hawkish US Fed hiking interest rates by 75 basis points to 3-3.25 per cent last week.
The greenback rose sharply to multi-year highs against major currencies fearing a global recession.
News agency Reuters, citing traders, reported that the Reserve Bank of India is likely to sell dollars to contain the decline.
“The reason the rupee is managing to cling on to 81.50 is the RBI,” a private bank trader said. “But the supply of dollars by the RBI is getting easily absorbed.”
The rupee hit a record low of 81.5525 per dollar, down from 80.99 in the previous session.
RBI likely to increase rates yet again
In order to control persistent inflation, the Reserve Bank of India (RBI) may take direction from its international counterparts, such as the US Federal Reserve.
According to analysts, the RBI, which has hiked the short-term loan rate (repo) by 140 basis points (bps) since May, may again seek an increase of 50 bps to bring it to a three-year high of 5.9%.
In May, June, and August, the central bank increased the repo rate by 50 bps each time. Currently, the rate is 5.4%.
Retail inflation measured by the consumer price index (CPI), which had begun to moderate since May, has once more firmed up to 7% in August. When drafting its bimonthly monetary policy, the RBI considers retail inflation.
The US Fed hiked interest rates for the third time in a row, increasing them by 75 basis points to bring the target range to 3 to 3.25 percent. To control inflation, the central banks of the UK and the EU have also raised interest rates.
