Representative Image
The rupee weakened further to a fresh record low of 82.70 against the dollar on Monday, tracking losses in emerging markets on anticipation of aggressive tightening by the US Federal Reserve.
At 9.10am, the home currency was trading at 82.70 against the dollar, down 0.47 percent from its previous close of 82.33. The INR opened and touched a fresh record low of 82.72 to USD.
The 10-year bond yields rose for seven out of eight sessions, trading at 7.483 percent, up 3 basis points from its previous close of 7.455 percent. Both bond yields and prices move in opposite directions.
US employers hired more workers than expected in September, while the unemployment rate dropped to 3.5 percent. Analysts said the surprisingly low US unemployment rate implies that the Fed will have to continue raising interest rates longer than the markets had discounted.
On Friday, US Federal Reserve Governor Christopher Waller and Lisa Cook said the Fed needs to keep raising interest rates into early next year to bring down stubbornly high inflation, Reuters reported.
On the home front, traders await the consumer price inflation print for September that will be out on October 12. According to Bloomberg estimates, the CPI for September will rise to at 7.3 percent from 7 percent a month ago.
Brokerage firm Kotak Institutional Equities expects more than domestic factors, external factors such as global slowdown, geopolitics-led risks to energy prices, dollar strengthening, and higher-for-longer global inflation and rates (implying risks of lower-for-longer global growth) will weigh on India’s macro outlook.
In the near term, the extent of rupee depreciation and the RBI’s response through rates and forex reserves will be keenly watched. Over the medium term, markets will evaluate the extent of growth recovery, success in capping inflation pressures, and managing twin deficits, a Kotak report said.
“Emerging pressure for crude oil prices, sustained strength in the US dollar and volatile foreign fund flows would weigh on the Indian rupee. To add to that, the country’s external balance would stay pressured. The weakness in the INR against the USD is to prevail and we expect it to move in the range of 82 to 83.15 a dollar this month,” said Edelweiss Wealth Research in its recent note.
