Rupee in freefall, hits all-time low of 77.50/$

• Weakening risk appetite
• Rising bond yields in the US
• Alarming higher inflation
• FII selling may continue
• More aggressive rate hikes likely by global central banks

Forex analysts expect the USDINR (Spot) to trade with a positive bias and quote in the range of 77.20 and 77.80

Mumbai: Extending its losses for a second day, the rupee on Monday slumped by 54 paise to close at a record low of 77.44 against the US dollar, pressured by the strength of the American currency overseas and unabated foreign fund outflows.

Forex traders said risk appetite has weakened amid rising bond yields in the US and mounting concerns about inflation that may trigger more aggressive rate hikes by global central banks. At the interbank foreign exchange market, the rupee opened lower at 77.17 against the greenback, and finally settled for the day at 77.44, down 54 paise over its previous close.

During the trading session, the rupee touched its lifetime low of 77.52. On Friday, the rupee had slumped 55 paise to close at 76.90. In the last two trading sessions, the rupee has lost 109 paise against the greenback.

"Indian Rupee spot plunged to record lows, tracking weakness in Asian peers amid a stronger dollar index and surging treasury yields in the US," said Royce Vargheese Joseph, research analyst (currency and energy), Anand Rathi Shares and Stock Brokers.

Equity markets witnessed a sharp sell off as real rates in the US turned positive and investors turned risk averse evaluating the need for a higher rate hike to tame inflation going forward, Joseph said.

Joseph further said "elevated crude prices and rising domestic inflation, well above RBI's upper band, might prompt further FII selling from domestic securities. Meanwhile, RBI's off cycle meeting on 4th May did little to strengthen the Rupee. Going forward, we might see the rupee spot weakening towards 77.8 levels."

The dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.33 per cent higher at 104, tracking rising US yields amid fears about higher interest rates.

"Rupee fell to fresh all time lows on Monday as the dollar rose broadly against its major crosses. Last week's central bank policy action led to heightened volatility in most of the currencies. Stronger dollar and sustained up move in global crude oil price is weighing on the overall market sentiment," said Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. Somaiya further said that this week, focus will be on inflation data of India and the US. "We expect the USDINR (Spot) to trade with a positive bias and quote in the range of 77.20 and 77.80."

According to Jateen Trivedi, Senior Research Analyst at LKP Securities, "Dollar staying above USD 104 indicates FII's aggressively exiting from emerging markets, higher Vix indicate no trend is sustainable and due to higher inflation, aggressive liquidity squeeze from central banks pressures rupee altogether. Crude prices have also been rising for a month now making the rupee even weaker." "I look at the rupee continuing its downward journey as the dollar rise is a major risk to prices. A relief on the rupee front can only be seen if the dollar index cools off," Trivedi said.