Rupee hits new low at 81.9 as US dollar rallies to record high

The rupee touched a new low on Wednesday after the US dollar climbed to new highs following the White House's statement that the US is not looking at any accord to weaken the dollar. Besides, hawkish remarks from Federal Reserve policymakers added more fuel to the skyrocketing greenback. The domestic currency slumped 40 paise to an all-time low of 81.93 against the US dollar in early trade on Wednesday.

On Monday, the Rupee was at 81.6525. It was trading between 81.30 and 81.64 on Tuesday. The Wednesday fall came on the back of White House National Economic Council Director Brian Deese’s statement where he said that the US is not looking at another 1985-type Plaza Accord among major economies to counter the dollar’s strength.

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He reportedly said that US Dollar strength shows US economic strength in the present world. “I don’t anticipate that that’s where we’re headed,” Deese said at an event at the Economic Club of Washington, DC when asked about a global agreement to adjust currency values as done in 1985.

At present, the US Dollar index is at an all-time high of 114.68. As per Bloomberg data, the Dollar Spot Index has propelled by 16 per cent this year and reached a record high on Tuesday on the back of interest-rate hikes, which has been very aggressive since the 1980s as per experts. The US Dollar Index measures the strength of the American currency against a basket of other major currencies. The yield on the US 10-year Treasury touched 4 per cent for the first time since 2010.

Not just Rupee, Sterling dipped 1 per cent to $1.0634, the New Zealand Dollar lost about 1 per cent to its lowest since March 2020. The onshore yuan fell to the weakest level of 7.2235 against the Dollar since the global financial crisis in 2008. Overall, most Asian currencies fell 10-15 per cent. In comparison, the Rupee has depreciated only 9 per cent. 

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Most emerging market currencies have been hit badly as investors shift out of riskier assets and invest in things like US bonds to capture rising yields. As per experts, the dollar would remain firm in the next few months until Fed would continue to announce rate cuts to prevent the economy from falling into recession.