The nosedive continued for the Indian rupee against the United States dollar on Monday with the former slumping to a new all time low of 82.66. Amid the solid US jobs report cementing bets of more large Federal Reserve rate hikes, the rupee tanked from its previous low of 82.33.
In recent sessions of trade, the rupee has consistently posted record lows with concerns over oil prices, rising treasury yields, FII outflows and offshore demand for the US dollar. The Reserve Bank of India (RBI) has also not been able to stop the constant downward slide unlike prior occasions.
IFA Global, in a note said, “The double whammy of higher US rates and higher crude prices is back to haunt the Rupee. While the RBI was able to defend the Rupee successfully through the last round of simultaneous stress on current and capital account by spending it's Reserves, this time around things are likely to be different. After having exhausted a significant portion of its Reserves, RBI seems concerned about the burn rate of Reserves and appears to be spending them very judiciously. This has resulted in Rupee adjusting and aligning itself with fundamentals and it's peer group currencies.”
India’s forex reserves declined to $532.66 billion in the week through September 30, the lowest since July 2020. In the week before that, the reserves were recorded at $537.5 billion.
Meanwhile, after having an extended rally with a near four per cent jump on Friday to five-week highs, the oil prices eased a bit today. An OPEC+ decision to cut down in oil production, the largest supply cut since 2020, have boosted crude prices despite concerns regarding recession and rising interest rates.
“US jobs report that came out on Friday was solid with headline NFP print coming in line with expectations (263k v/s 275k expected). Unemployment rate dipped to 3.5% from 3.7% in August. Wage growth too was healthy at 0.3% MoM and 5% YoY. This disappointed investors who were looking for some signs of weakness in labor markets that could cause the Fed to pivot from its current stance of aggressive monetary policy tightening. This week focus will be on the US September CPI print due on Thursday and FOMC minutes due on Wednesday,” added IFA Global.
Elsewhere, the Indian stock market crashed in early trade on Monday leading to Rs 3 lakh crore investor wealth being wiped off. The Sensex tanked around 700 points, while the broader Nifty50 tanked by around 200 points.
Data on India’s retail inflation, expected to arrive on Wednesday, has likely accelerated to a five-month high of 7.30 per cent in September due to surging food prices, according to a Reuters poll. A poll of 47 economists suggested inflation – measured by the Consumer Price Index – rose to an annual high of 7.30 per cent in September from 7.00 per cent in August.