MUMBAI — The Indian rupee pulled back from a record low on Monday due to likely dollar sales from the Reserve Bank of India, as a hawkish US Fed stance hurt Asian currencies.
The rupee was quoting at 80.0550 per US dollar by 0553 GMT compared with 79.8650 in the previous session. The local unit had fallen to a record low of 80.12 in the first couple of minutes of trade before RBI stepped in, traders said. Three traders, two at state-run banks and one at a private sector bank, told Reuters that RBI was selling dollars to arrest rupee’s slide.
Asian currencies and equities declined on Monday following Federal Reserve Chair Jerome Powell’s speech that pushed back against expectations that the US central bank could cut rates later next year.
Powell noted that reducing inflation would likely require a sustained period of below-trend growth, hurting risk appetite. US equities dropped by the most in more than two months on Friday.
The Fed is now shifting towards a period of purposefully raising rates to a higher for longer stance after “expeditious” rate hikes this year, Nomura said in note.
“The Fed sees a greater need to keep rates restrictive for some time to ensure inflation does not become further entrenched,” Nomura said.
The 2-year Treasury yield rose to 3.47%, the highest since 2007.
Safe-haven demand and rising Treasury yields lifted the dollar index to its highest level in twenty years.
Indian shares dropped to its lowest level in a month. The uptick in oil prices, despite the weak risk sentiment, added to rupee’s woes.
The Brent crude contract was up about 1% at $102 a barrel on expectations the OPEC will cut output to support prices. (Reporting by Nimesh Vora; Editing by Neha Arora)