Indian rupee hits record low on Fed rate hike worries

Indian rupee hits record low on Fed rate hike worries

Indian rupee hits record low on Fed rate hike worries

Indian rupee hits record low (Credits: Google)

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  • Indian rupee hits record low against US dollar ahead of an interest rate hike this week.
  • The rupee hit 78.2825 per dollar for the first time on Friday.
  • Sensex index slides 2.1 percent as foreigners take out $24 billion from local stocks.
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The Indian rupee hit a record low against the US dollar on Monday, ahead of an expected interest rate hike this week to combat rising inflation.

The rupee reached 78.2825 per dollar for the first time on Friday, as a forecast-beating US inflation report raised the probability of the Federal Reserve tightening monetary policy further.

The benchmark Sensex Index slid as much as 2.1 percent as foreigners took out about $24 billion from local stocks, Bloomberg News reported.

Read More: Inflationary pressures are fueling bets on faster Fed rate hikes

The Indian currency has been weighed down by rising oil prices, a more aggressive Fed and by capital outflows in emerging markets as foreign investors turn risk-averse.

Central banks have adopted more hawkish policies in recent months, including in India, with the Reserve Bank hiking borrowing costs by 50 basis points last week for the second time in as many months.

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The RBI earlier announced an out-of-cycle 0.4 percent rate rise in May.

India’s central bank has also been selling off foreign currency to stabilise the currency.

Inflation has also jumped in India owing to the fallout from the Ukraine war, overshooting the central bank’s two-to-six percent target range from January to April.

It reached an eight-year high of 7.79 percent in April, fueled by an increase in food and fuel prices.

To keep prices under control, the government barred wheat exports in May, despite the fact that harvests had already been impacted by a heatwave.

Sugar exports were also limited to protect supply, and the government reduced taxes on fuel and edible oils.

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Read More: Stocks waver as Fed rate looms, oil soars on EU embargo

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