Rupee Hits Record Low: Will The Currency Fall Further

The Rupee opened with losses and the currency hit levels of 77.52 against the US Dollar before settling around 77.4650. A sell-off in the global equity markets which was triggered by hike in interest rates by the US Federal Reserve, war in Europe and growth concerns in China due to COVID-19 surge, led to the Rupee depreciation.

Data showed that the U.S Non-farm payrolls grew by 428,000 for the month and the unemployment rate was at 3.60%. The U.S Dollar index hit a fresh swing high of $104.18 levels post the payrolls data. The week ahead will see members from the FOMC speak and the all-important U.S CPI data will also be released. Meanwhile, China continued to grapple under COVID-19 surge.

Reports suggested that, Shanghai authorities were tightening the city-wide COVID lockdown they imposed more than a month ago, prolonging into late May. Markets have viewed the Chinese governments 'zero-covid policy' as a major risk to global growth. The effects of the lockdown were seen as China's export growth slowed to single digits in April as the curbs halted factory production, disrupted supply chains and triggered a collapse in domestic demand. Any policy action by the PBOC will help improve the sentiments. For the week ahead, the Rupee needs to reclaim levels of 77.10 to see a recovery towards 76.80/76.70 again. The bias will stay negative until then and the currency will see further depreciation towards 77.80 levels.

The above is from the Currency Desk of Emkay Global Financial Services