Indian rupee hits record low on Fed rate hike worries – Business

The Indian rupee plunged to an all-time low against the dollar on Monday and the benchmark NSE Nifty 50 index fell more than 2% ahead of a US rate hike this week to stem surging inflation.

The rupee reached 78.28 against the dollar for the first time as the US inflation report released on Friday raised expectations for further tightening by the Fed.

The Indian currency fell as oil prices rose, the more aggressive Fed and capital outflows from emerging markets where foreign investors were risk-averse.

The central bank has adopted more hawkish policies in recent months, including India, and the central bank last week raised its borrowing costs by 50 basis points, the second time in months.

The RBI previously announced an out-of-cycle rate hike of 0.4% in May.

The central bank of India is also selling foreign currencies to stabilize the currency.

The benchmark 10-year Treasury yield was 7.59%, the highest since February 28, 2019, at 7.61%. Reuters reported The 10-year yield closed at 7.52pc on Friday.

Inflation in India surged above the central bank’s target range of 2-6% from January to April in the aftermath of the Ukraine war.

In April, it hit an eight-year high of 7.79pc, driven by soaring food and fuel costs.

In May, the government curbed prices by embarking on exports of heat-stricken wheat.

While the government cut tariffs on fuel and cooking oil, it also restricted sugar exports to protect supplies.

Inflation fears ruin Indian stocks

Indian stocks fell 2.5% on Monday as US inflation data and Beijing’s coronavirus warning shook world markets, and traders in Asia’s third-largest economy await further signals on consumer price data for May.

The NSE Nifty 50 Index is down 2.5% as of 0509 GMT at 15,785.05, with all constituents trading lower. At the beginning of the session, it dropped to a four-week low of 2.8pc. S&P BSE Sensex fell 2.6 points to 52,874.03.

“Inflationary pressures are real and recent performance by US companies has shown that it has become difficult to pass on high inflationary pressures,” said Saurabh Jain, vice president of SMC Global Securities. “Investors are afraid we are going into a recession.”

Now all eyes are on India’s retail inflation data to be released later. all Reuters The Consumer Price Index fell slightly in May, but remained well above the central bank’s allowable ceiling for the fifth straight month, according to opinion polls.

Asian stocks fell on fears that the US Federal Reserve might take more aggressive austerity measures after data released last week showed the consumer price index hit a 40-year high last month.

Adding to investor concerns, Beijing’s most populous district of Chaoyang announced on Sunday three large-scale tests to contain a “severe” Covid-19 outbreak.

IT stocks lost the Nifty 50 as Infosys Ltd and Tata Consultancy Services each fell 3.3%. The Nifty IT index fell 3.4p.

Bajaj Finserv and IndusInd Bank were the biggest losers in the NSE, down around 5% each. The NSE Banking Index fell 3.5p.