Indian rupee drops to all-time low of 77.42 against the US dollar

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• May 9, 2022 | Dhupali Das

The rupee has continued to fall despite the RBI's surprise rate hike as the current-account imbalance widens, raising fears. 

Digital Desk: In early trade on Monday, the Indian currency deepened its losses and hit an all-time low of 77.42 against the US dollar, pulled down by the US dollar's strength in the outside market, foreign money outflows, and a drop in local equities.

Rupee began at 77.17 per dollar, then lost ground to quote at 77.42, registering a fall of 52 paise from the last close and slipping past the previous all-time low of 76.98 touched in March. It dropped 55 paise to close at 76.90 against the US dollar on Friday.

The dollar rose against the backdrop of global risk aversion and a rise in US Treasury yields. The dollar index, which measures the greenback's strength against a basket of six currencies, was up 0.35 percent higher at 104.02 after rising US yields and concerns about higher interest rates.

"Due to a strong dollar and negative global market sentiments, the rupee is projected to drop today.  Investors are concerned about rising inflation, monetary policy tightening around the globe, economic slowdown, and mounting geopolitical tensions, which have harmed market sentiment. Furthermore, market investors are concerned that rising crude oil prices may harm India's trade and current account," said a  brokerage ICICI Securities.

The rupee has continued to fall despite the RBI's surprise rate hike as the current-account imbalance widens, raising fears. The Reserve Bank of India has leveraged its foreign exchange reserves to keep the rupee from falling further. According to the most recent figures, for the first time in a year, the reserve pile fell below $600 billion.

Following a sell-off in global markets and a drop in shares of index giant Reliance Industries, equity benchmarks continued to take a hit on Monday, with the Sensex falling roughly 800 points in early trade.