Indian rupee falls to over 80% against US dollar

Indian rupee falls to over 80% against US dollar

MUMBAI: The Indian rupee fell to over 80 per United States dollar for the first time since July 19 as the greenback extended its rally and foreign capital outflows increased.

The rupee was 80.0600 against the dollar soon after trading started, according to Bloomberg data.

Foreign investors have withdrawn a net US $30.8 billion in debt and equity this year because of tighter US monetary policy.

US consumer price inflation hit a new four-decade high in June, exceeding market forecasts and stoking expectations for a large Federal Reserve hike next week, according to data released last week.

Finance Minister Nirmala Sitharaman attributed the rupee's sharp fall to external reasons in a written statement to the Indian parliament on Monday.

The Russia-Ukraine conflict, soaring crude oil prices and tightening global financial conditions are the main factors that cause the weakening of the Indian rupee against the US dollar, she said.

In 2022, the Indian currency has been strengthened against the British pound, the Japanese yen and the euro, according to Sitharaman.

A country that imports 80 per cent of its oil needs has a deteriorating trade balance because of higher crude prices.

India's merchandise trade deficit was widened to a record US $26.18 billion in June, according to official data released last week.

The Ministry of Finance said that costlier imports could cause the rupee to depreciate further, as well as widening the current account deficit.

In June, consumer price inflation in India, the world's sixth-largest economy, cooled off slightly to 7.01 per cent after hitting an eight-year high of 7.79 per cent in April.

Despite repeated interest rate hikes in May and June, the price of the currency has gone up well above the central bank's 2 per cent to 6 per cent target range.

The central bank sold more than US $34 billion of foreign currency reserves in an effort to stabilise the rupee.