The rupee recovered by 10 paise on Monday afternoon after hitting an all-time low of 80.15 against the US dollar during intra-day trade, PTI reported. At 5 pm, the rupee was valued at 79.94 against the dollar.
The Indian currency suffered during early trading after Washington said that it would tackle high inflation even at the cost of economic growth, PTI reported.
The equity markets also tanked as the 30-share BSE Sensex closed at 57,972.62, more than 816 points below the previous closing mark. The 50-share Nifty also fell by 246 points to close at 17,321.90.
The rupee had slid below the 80-mark for the first time in July due to high crude oil prices in the global market. The domestic currency had firmed up over the last few weeks. But on Monday morning, the currency markets reacted sharply to comments made last week by US Federal Reserve Chair Jerome Powell.
At an event on Friday, Powell had said that that the US economy will need tight monetary policy for some time to bring inflation under control, The Financial Express reported. He added that controlling price rise could require a “sustained period of below-trend growth”.
Taking cue from Powell’s statement, the rupee, which had closed at 79.87 against the US dollar on Friday, opened at 80.02 as markets resumed on Monday, PTI reported. Soon, it slid to the life-time low of 80.15.
Typically, central banks raise lending rates to control inflation. Higher lending rates translate to more expensive loans for consumers, which in effect, discourages them from making new investments. This leaves consumers with more cash in hand to tackle price rise in items of their daily needs. However, consumers not making new investments also lead to slowdown in the economy.
In India, the Reserve Bank of India has hiked repo rate three times in the last three months as retail inflation has stayed above the central bank’s upper tolerance level of 6% for seven straight months till July.
Meanwhile, in the equities markets trade on Monday, all sectoral sub-indices with the exception of Nifty FMCG were making losses. Stocks in the metal, banking and financial services sectors were faring the poorest.
Hindustan Unilever, Nestle India, Maruti and Reliance Industries were some of the prominent stocks that managed to gain. However, several big-ticket stocks like Infosys, Wipro, Tata Consultancy Services, Tata Steel, State Bank of India, ICICI Bank and Bharti Airtel were making losses in the range of 1.3% to 4.5%.