The Indian rupee fell to a record low of 78.29 versus the US dollar in early trading on June 13, as crude oil prices rose and international investors continued to withdraw funds from Indian assets. According to forex dealers, a sell-off in financial markets and a stronger dollar abroad are additional factors. Many analysts believe the rupee will now trade in the 78-79 zone versus the US dollar.
Meanwhile, the US Federal Reserve (Fed) recently hiked interest rates as petrol, food, and most other goods and services prices rose in May, pushing inflation to a record four-decade high and providing no relief to US residents.
The Chinese yuan and Japanese yen, as well as other major currencies, have all fallen in value versus the US dollar. However, India is more susceptible since it relies on imports to cover almost 85 percent of its oil needs.
The Reserve Bank of India’s foreign exchange reserves slipped below $600 billion in the week ending April 29, according to central bank statistics.
According to the Labor Department, consumer prices in the United States increased by 8.6 percent year on year in May, outpacing the 8.3 percent YoY rise in April.
The latest inflation number, the highest since 1981, will increase pressure on the Fed to keep increasing interest rates quickly.
Gas prices in the United States increased by 4% in May and have risen by over 50% in a year. According to a worldwide newswire, rampant inflation is putting serious strains on US households.
The Fed has indicated that it would increase its benchmark short-term interest rate by a half-point next week and again in July.
According to polls, excessive inflation is the nation’s top concern, and the majority of Americans disapprove of President Joe Biden’s handling of the economy.