New Delhi - The Indian Rupee breached the 80.05 per Dollar mark to hit a fresh record low on Monday while bond yields rose 6 bps, tracking the fall in global equities on the back of the US Federal Reserve chairman Jerome Powell’s hawkish rhetoric at the Jackson Hole event.
The local currency was trading at 80.05 against the US dollar, down 0.25% from its previous close. At the interbank foreign exchange, the rupee opened at 80.05 and touched a record low of 80.13 a dollar. The 10 year bond yield gained 6 basis points to 6.27% from its previous close of 6.21%. Note that bond yield and prices move in opposite directions.
“The recent bout of weakness is caused by strong dollar demand from oil importers with crude oil prices holding steady. Crude oil prices have again surged higher after a brief period of consolidation as Saudi Arabia has not committed to increasing oil output,” she said.
"USDINR is on a strong wicket, with such a positive USD backdrop. A strong US Dollar Index, high US bond yields with an deeply inverted yield curve and weak equity markets all make it challenging for FPI and carry trade flows in EMs. However, the speed of the up move will be closely regulated by RBI," said Anindya Banerjee, VP, Currency Derivatives & Interest Rate Derivatives at Kotak Securities.
Among Asian peers, South Korean Won declined 1.3%, Thai Baht lost 0.8%, Japanese Yen 0.64%, China Renminbi 0.6%, Taiwan Dollar 0.6%, Malaysian Ringgit 0.5%, Indonesian Rupia 0.43%, and Singapore Dollar 0.34%. In his statement at the Jackson Hole Symposium, the Fed Chairman said the US economy will need tight monetary policy “for some time” before inflation is under control.
He added that reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions.
Source -ET, Financial express