The value of the Indian Rupee dived to an all-time low on Monday, Rupee crossed the ₹78 mark against a US Dollar for the first time. The domestic currency started trading 30 paise lower at 78.14 on Monday the previous close of 77.84 rupees on Friday. Factors including power-up in the Dollar, US treasury yields, ascended International crude oil prices and a strong sell-off in the equity market are pushing down the value of the Rupee. Last week, analytics showed that Rupee has lost 21 paise against a buck. However, despite this news, on Monday, the value of India’s benchmark 10-year bond yield touched its highest in more than three years, being traded at 7.60 per cent, the highest since February 28, 2019.
Mohit Nigam, head of PMS, Hem Securities said on Rupee’s fall, “Some of the reasons behind this weakening include persistent FII selling from past few months, rising bond yields, increasing oil prices and inflationary pressures for coming quarters.”
What Are The Main Reasons For The Fall In Rupee Against US Dollar?
US CPI or Consumer Price Index rate surged to 8.6 per cent in May, resulting in the biggest inflation surge since December 1988. This surge forced the benchmark US 10-year yield to touch 3.2 per cent on Monday. This means a 12 bps hike after an unexpected surge in US inflation
The continued hike in the US dollar index on Monday paralleled high inflation and raging US 10-year-yield. Last week the US dollar index touched near a four-week high. On Friday the index closed at 104.235 after a 0.99 per cent increase. So the surging dollar index and US 10-year yield dragged down the Indian Rupee.
Prashanth Tapse, Vice president of Mehta Equities Ltd, said, “On the domestic front, persistent FII selling continues to dampen sentiment. FIIs have been net sellers for the eighth consecutive month, net offloading more than Rs 3.45 lakh crore since October 2021.”
Sriram Iyer, from Reliance Securities, said, “Today’s range for the USD INR pair is 77.80-78.30. Investors will remain focused on retail inflation numbers. Indian bond yields are likely to open higher tracking spikes in US Treasury rates, while the major focus will remain on local retail inflation data. The benchmark 6.54 per cent bond is likely to trade in a 7.50 per cent -7.56 per cent band on Monday.”
Jigar Trivedi, research analyst- commodities & currencies fundamental from Anand Rathi Shares & Stock Brokers, said, “We might see more weakness ahead of the FOMC meeting on June 15, where Fed is expected to hike rates by 50 bps and showcase a more aggressive tone. However, runaway depreciation might not happen amid RBI intervention.”