The Indian rupee hit a record low on Friday, weakening for the 11th straight week as foreign investors continued to dump riskier assets amid mounting concerns about a global recession, with investors now waiting for the outcome of the Fed meeting on July 27.
The partially convertible rupee ended trading at 79.8775 for the dollar, just a shade weaker than Thursday’s close at 79.8750. Previously, it hit 79.96, hitting an all-time low for the fifth straight session.
The rupee has now fallen 14 of the past 15 weeks.
“We’re just shy of 80 for the dollar, a level people don’t expect to reach until the end of the year. We could see a further decline in the rupee unless there is a reversal in foreign money flows,” a senior trader at a private bank said.
Emerging market currencies were on track for the sixth straight week of losses as concerns about a possible global economic downturn and faster rate hikes in the US dent the appeal of riskier assets.
Indian stocks rose 0.7 percent, but foreign investors dumped domestic assets with net sales of more than $30 billion to date.
However, analysts are forecasting a change in foreign flows, with stock market valuations looking quite attractive after recent declines, but the US Federal Reserve’s policy outcome on July 27 will play a key role.
Rising interest rate differentials with the United States could lead to increased risk aversion and further damage the rupee.
Traders began betting at the July 26-27 meeting that the Fed would go for a super-large tightening after data from Wednesday showed consumer price inflation had risen at the fastest pace in four decades.
But bets were cut after Fed Governor Christopher Waller and St. Louis Fed President James Bullard said they were in favor of another 75bps hike this month.
However, India’s 10-year benchmark yield continued to rise, closing trading by 5 basis points at 7.43 percent.
Over the course of the week, 10-year yields rose 2 basis points, breaking off the three-week decline.