Today the Indian rupee dropped to a record low of 80.13/$1 from a previous close of approximately 79.87. Last month, the rupee hit an all-time low of 80.06/$1. So far this year, the US dollar has gained more than 7% against the rupee.
Why is the rupee depreciating continuously?
The US Federal Reserve has raised its key interest rate four times this year to control the worst inflation in decades.
Higher rates of interest increase the opportunity cost of holding non-yielding bullion while strengthening the dollar.
On Friday, the US central bankers at the Jackson Hole meeting signaled that restrictive financial policy would be maintained for a longer period to reduce inflation. The US policymakers will review monetary policies next month and may increase lending rates further.
According to analysts, a sell-off in global equity markets triggered by the Fed Reserve’s interest rate hike, the Ukraine-Russia war, and growing uncertainties in China because of the Covid-19 surge – significantly contributed to the rupee’s depreciation.......