Rupee hits all-time new low of 80.44 against US dollar

Meanwhile, the Indian stock market falls as the US Federal Reserve raised the policy rates again to beat inflation.

Indian Rupee

The Indian currency rupee breached the psychologically crucial 80 mark again to touch another fresh all-time of 80.44 against the US dollar on Thursday, against its previous day’s close of 79.97. This sharp depreciation was because of the current strength in the US dollar Index. 

This comes when the US Fedex increases the policy rates to fight against inflation which coincides with a fall in the Indian stock market. Indian stocks declined, though marginally, on Thursday morning in line with weak global cues, following yet another policy rates hike by the US Federal Reserve in its fight against high inflation. 

However, a steep decline was likely cushioned as investors seemed to have already discounted the possible rate hikes by the US central bank. At 9.33 am, Sensex traded at 59,303.96 points, down 152.82 points or 0.26 per cent, whereas Nifty traded at 17,671.95 points, down 46.40 points or 0.26 per cent. 

“The big question from the Indian market perspective is whether India’s outperformance will continue in the present global risk-off context. Investors can remain optimistic but be cautious since India’s valuations are on the higher side,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. “Financials, capital goods, select autos, telecom and construction-related stocks can be bought on declines,” Vijayakumar added. 

The key policy rate in the US was raised by 75 basis points to 3.0-3.25 per cent, which is the third consecutive hike of the same magnitude. The US central bank seeks to achieve maximum employment and inflation at the rate of 2 per cent over the long run and it anticipates that the ongoing hikes in the target range will be appropriate. 

Reacting to the rate hike move, stocks in the US fell nearly 2 per cent to close the day. Consumer inflation in the US though declined marginally in August to 8.3 per cent from 8.5 per cent in July but is way above the 2 per cent goal. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. 

Also Read: What soaring value of dollar means to Indian economy

The US Fed statement added that the Committee’s futures assessments would consider a wide range of information, including readings on public health, labour market conditions, inflation pressures and expectations, and financial and other international developments.