The Indian rupee recorded a new lifetime low of 83.3050 against the US dollar on Friday tracking weakness in other Asian currencies. The drop comes following the hawkish statement by US Federal Chair Jerome Powell on Thursday where he said that the central bank will not hesitate to raise interest rates if necessary to achieve its inflation target of 2%.
This led to an increase in the US bond yields as the 2-year yield rose to 5.04% and the dollar index was just shy of the 106 against a basket of six major currencies.
The previous lifetime low for the rupee was 83.2950. On Thursday, the domestic currency closed at 83.2800.
“INR is expected to trade in a narrow range of 83.20 to 83.35 as RBI limits the depreciation in the local currency. Investors will monitor the US consumer confidence data for November,” Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP said.
After Powell warned that interest rates could still rise and was hawkish in his rhetoric, the US 10-year treasury shot-up to 4.6190%, Bhansali said.
Powell’s sentiment was largely echoed by other Fed speakers on Thursday.
“It’s clear that the Federal Reserve wants to maintain a tightening impulse. This makes sense, as any hint of neutrality would hasten a market dash to discount rate cuts,” a Reuters report said quoting an ING Bank note.
Asian currencies declined and shares were mostly lower after US equities retreated.
The next key event will be the US inflation data next week.
Meanwhile, the Indian frontline indices also traded weak on Friday. While the Nifty was trading at 19,388.40, down by 6.90 or 0.04%, the S&P BSE Sensex was hovering near 64,770.73, lower by 61.47 or 0.09%.
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