The rupee continued to plunge to hit a fresh record low of 81.9 against the US dollar on Wednesday amid a spike in US bond yields. On Monday, the Indian currency declined 58 paise to close at an all-time low of 81.67. However, it recovered a bit on Tuesday with the rupee gaining 37 paise to touch 81.30 against the dollar.
Experts believe that the focus will now shift to the Reserve Bank of India’s meeting starting today following its decision on Friday. The 38th meeting of the Monetary Policy Committee, constituted under the Reserve Bank of India Act, will be held during September 28-30.
The sinking Indian rupee will make the import of crude oil and other commodities expensive further fueling inflation which for the past several months has remained above the RBI's upper tolerance band of 6 per cent.
The RBI is considering several bespoke measures starting from opening a special window for oil importers and reducing hedging costs for foreign-currency depositors to arrest the decline in the rupee against the surging US dollar, according to the Economic Times report.
The domestic currency saw a depreciation of almost 9 per cent against the dollar in the calendar year 2022, as per the report.
The US Dollar Index which measures the strength of the American currency against a basket of other major currencies hit a new high of 114.68 in Asia trade and was last up 0.42 per cent at 114.62, reported Reuters.
The dollar hit a fresh two-decade peak on the back of rising Treasury yields, while sterling languished near a record low on concerns over Britain's radical tax cuts to spur growth, according to news agency Reuters.
The new multi-year high came after a White House official ruled out a currency agreement to weaken the dollar. The yield on the US 10-year Treasury touched 4 per cent for the first time since 2010.
The strengthening in the dollar pushed other currencies to their record lows on Wednesday. Sterling was down nearly 1 per cent to $1.0634 and Aussie was at its lowest since May 2020. The kiwi lost declined 1 per cent to its lowest since March 2020 while the yuan was at its lowest since 2008.