After the head of the US Fed said high-interest rates will persist for a while to control inflation, the Indian rupee plummeted substantially today. Last month, the rupee fell to an all-time low of 80.06. The US dollar has increased by more than 7% this year vs. the Indian rupee.
The rupee dropped from the previous session’s finish of 79.87 to a record low of 80.11 against the US dollar. The US dollar index touched a 20-year high in the currency market, while the euro and pound dropped to record-low levels. Trading losses for Asian currencies range from 0.30 to 0.50 percent.
Jerome Powell, the chair of the Federal Reserve, indicated on Friday at the Jackson Hole meeting of central bankers that the restrictive policy would be maintained for a longer period of time to reduce inflation.
The markets anticipated Powell to maintain his hawkish stance at Jackson Hole, but they did not anticipate or take into account the Fed chief’s ultra-hawkish tone and his warnings that the policy will hurt some people and companies and that this is the unfortunate cost of lowering inflation.
In order to combat the worst inflation in decades, the US central bank has already increased its benchmark overnight interest rate four times this year. The Fed’s officials will gather to discuss monetary policy next month. While strengthening the currency, higher interest rates raise the potential cost of keeping non-yielding bullion.