Rupee in freefall! Hits new all-time low against US dollar

Troubles for rupee continue as the domestic currency sank to a new all-time low against the U.S. dollar in early trade today. The Indian rupee fell 14 paisa to 77.69 amid negative cues from the global markets and dismal economic outlook back home. It pared losses later in the day to trade at 77.65 around mid-day.

However, analysts are apprehensive that the rupee might slip towards 78 levels if the macroeconomic difficulties persist.

“The rupee opened at an all-time low against the U.S. dollar today. Disappointing Chinese economic data, further clarity on U.S. Federal Reserve and ECB rate hikes, rising crude oil prices and a correction in the domestic equity markets have led to the rupee depreciation. Moreover, the cut in India’s GDP projection amid soaring domestic inflation has also added to rupee woes,” Emkay Global Financial Services says in a note.

India’s WPI inflation for April stood at 15.08% against the forecast of 14.92%. Retail inflation print released earlier month shows price at an eight-year high of 7.79% after rising for the fourth month in a row.

Meanwhile, crude oil prices have remained high — around $100 per barrel — which has put further pressure on the Indian rupee.

Meanwhile, Chinese retail sales and factory activity tanked, casting a doubt on global growth amidst rising interest rate scenarios. The U.S. Fed has already forecasted 50 basis points hike in its upcoming meeting in June and July and cautioned that the central bank will have to be aggressive if inflation numbers don’t subside by September. The weak Asian markets and strong dollar have caused the rupee to slide.

“On a positive note, Shanghai aims to re-open and allow normal life to resume for the city’s 25 million people from June 1. Looking ahead, a recovery in global equity markets will be the trigger for the rupee to recover some lost ground against the dollar,” the Emkay note says. “Given the macro-economic headwinds, we expect gains for the Rupee to stay limited until levels around 77 holds and the currency can slip towards 78 levels.”