The rupee fell sharply with the massive sell-off of risky assets and the dollar’s rally weighing on the regional currencies. After strong US services data boosted and raised bets on the path of a strong Fed rate hike.
Bloomberg showed the rupee weakened to 79.8913, compared to Tuesday’s close of 79.8375.
In the interbank foreign exchange market, the rupee opened at 79.93 against the dollar, marking a decrease of 11 pounds from its last close and in initial trades, the local currency also touched 79.86 against the dollar, according to PTI.
On Tuesday, the rupee depreciated 4 piasters to close at 79.82 to the dollar.
According to Anil Kumar Bhansali, Head of Treasury, Finrex Treasury Advisors, RBI continues to sell dollars to curb the rupee’s decline. “All eyes will be on the European Central Bank (ECB) meeting where a 75 basis point rate hike to bring down inflation is discussed,” Bhansali told PTI.
In another sign of unease, the yen fell to a new 24-year low, the dollar spot index broke another record, and China fixed the yuan reference rate with the strongest bias ever.
A rising US dollar is hurting global currencies, tightening financial conditions and increasing inflation in other economies.
Data showed that the US service sector expanded unexpectedly last month, supporting the idea that the economy is not in a recession and providing room for the Federal Reserve to raise interest rates by another significant 75 basis points on September 21.
The US dollar index, which compares the performance of the US currency against six major currencies, rose 0.08 percent to 110.43, close to a 20-year high of 110.57.
“Central bankers are increasingly recognizing that the battle to bring inflation back to target will lead to a recession. Late cycles have been good for the dollar and bad for pro-cyclical currency blocs like Europe and Asia. Expect the dollar to rise,” said Chris Turner, head of global markets at ING. – “Holds its gains for the rest of the year and does not rule out a rise of another 5 percent.”