The Indian rupee hit a four-week low on Monday as the dollar continued its rally on the U.S. Federal Reserve’s hawkish stance, while the Chinese yuan’s weakness exacerbated losses in the local currency.
The partially convertible rupee fell 0.1% to 79.875, having dropped to its lowest level since July 27 at 79.9125.
After jumping 2.3% last week, the greenback extended its gains to firm up at 108.4 on Monday as Fed officials reiterated an aggressive monetary tightening stance ahead of the Jackson Hole symposium on Thursday.
“The dollar index’s strength, weakness in the Chinese yuan and local equities is pressuring the rupee,” said a trader at a private bank.
There is a chance the greenback will strengthen further and if it touches 110-level by the Fed’s symposium, the Reserve Bank of India may let the currency breach 80 gradually, he added.
Indian rupee seen weaker as Fed rate hike prospects strengthen dollar
The country’s central bank has been proactive in defending the key level after the rupee hit a record low of 80.065 on July 19. Several analysts now saw a chance the rupee could revisit the level this week.
Meanwhile, the yuan slumped to a near two-year low after China cut its benchmark lending rate to arrest a slowdown in the world’s second biggest economy, souring sentiment across Asian emerging markets.,
A volatile equities market dragged on the rupee, as investors locked-in gains after a recent rally.
The Nifty 50 index ended 1.5% lower after the RBI in its minutes of the August meeting released on Friday flagged that despite signs of inflation having peaked in India, bringing retail price rise closer to a 4% target is essential to help sustain economic growth.
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