Rupee falls to record low against US dollar

The Indian rupee fell sharply on Monday, hitting the 80 mark against the US dollar after Federal Reserve Chairman Jerome Powell’s hawkish speech.

At 11:00 am, the rupee was trading at 80.04, compared with 79.86 close at the previous trade against the US dollar.

The rupee weakened to a low of 80.14 per US dollar in the first few minutes of trade on Monday as the US dollar index strengthened well past the 109 mark.

The previous lifetime high for the rupee was 80.06 per dollar on 1[ads1]9 July.

“The Federal Reserve’s Jerome Powell’s hawkish speech has sent a bid for the US dollar, sending global stocks lower and bond yields higher. Restoring price stability will likely require maintaining restrictive policy for some time. Going forward, it is clear from both Powell and Fed speakers that further trajectory will be data dependent,” said Kunal Sodhani, Vice President, Global Trading Center, Shinhan Bank.

On Friday, Federal Reserve Chairman Jerome Powell signaled that the US Federal Reserve is likely to continue to raise interest rates and keep them up to tame inflation.

“Restoring price stability will likely require maintaining a restrictive policy for some time,” Powell said.

In a note, CR Forex said: “After the hawkish speech, the probability of the Fed’s 75 bps increase in September increased further up to 70 percent. The market rout led by Powell’s speech cut the wealth of US billionaires by $78 billion on Friday. In the FX package US DXY tests 20-year high, euro and pound fall near record lows Asian currencies trade with a loss of 0.30 percent-0.50 percent The yuan tests a 2-year low and thus the rupee is about to open on a record low at 80.10. The likely range for the day will be 79.70 to 80.30.”

The dollar index, which measures the strength of the dollar against the basket of six major currencies, was at 109,370.

Sodhani added that in view of sustained high bond yields, DXY may test 109.77 levels, with EURUSD may test 0.9860 levels and GBPUSD moves towards 1.1680 levels.

Brent oil prices also appear to be a bit sticky, and cannot be sustained at lower levels. Considering the above factors, USDINR may find strong support at 79.50 while a breach of 80.06 levels will influence option sellers to stop and let the USDINR pair move towards 80.60 levels.