Rupee at all-time low of 77.5 as high inflation triggers rate hike fears

The rupee plunged by 25 paise to close at its lifetime low of 77.50 as the dollar touched a fresh two-decade high amid global risk-averse sentiment and a higher-than-expected US inflation

The rupee plunged by 25 paise to close at its lifetime low of 77.50 against the US currency on Thursday as the dollar touched a fresh two-decade high in global markets on strong risk-averse sentiment and a higher-than-expected US inflation triggered fears of aggressive rate hikes.

The local currency also touched its record intra-day low of 77.63 to a dollar as losses in domestic stocks, concerns over weak growth, and persistent forex outflows negated the impact of a fall in crude oil prices.

At the interbank forex market, the rupee opened steeply lower at 77.52 against the greenback and moved in a range of 77.36 to 77.63 in the day trade.

The rupee finally ended at 77.50, down by 25 paise over its previous close of 77.25, cutting short its two-day winning run.

Previously, the domestic unit had closed at the record low of 77.44 against the greenback on May 9.

"Indian rupee registered a life low of 77.63 a dollar on a stronger dollar index and risk-averse sentiments. Investors sought haven assets with higher inflation and interest rates raised concerns over growth," said Dilip Parmar, Research Analyst, HDFC Securities.

The dollar index, a basket of six currencies, marked a new two decades high of 104.51 on elevated retail inflation.

The dollar bull run can continue with no sign of relief in the Chinese yuan and surging inflation keeping the central bank on the front foot, he added.

Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services said, "Rupee fell to fresh all time lows today as dollar continued to strengthen. But losses remained restricted as the RBI intervened to curtail volatility. Dollar strengthened after inflation rose in April in the US."