As a result of increasing policy "pain" pronouncements from major central banks, especially in the face of economic slowdown or recession, the rupee collapsed to a record low, and the dollar reached a new two-decade high.
In early trading on Monday, according to PTI, the native currency fell 31 paise to a record low of 80.15 versus the US dollar, following the dollar's strength and stable crude oil prices.
According to PTI, the rupee depreciated by 31 paise from its previous finish of 79.84 on Friday to quote at 80.15 versus the dollar at the interbank foreign exchange.
Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors, claims that the rupee depreciated after a hawkish Mr. Powell maintained the need for US rate rises until inflation drops below 2%.
"The RBI's actions will be extensively scrutinized by traders now that 80 has been permitted to be breached. The US's PMI and NFPR, which will provide information on the state of the labor and financial markets, are the following crucial events, "said Mr. Bhansali.
Bloomberg reported the rupee at 80.0363 against its previous closing of 79.8712.
However, economists said that the Reserve Bank of India and foreign portfolio investments could prevent further harm to the currency.
"Rupee crosses 80/$ threshold," reads a letter, "said Anindya Banerjee, Kotak Securities' vice president for currency and interest rate derivatives.
"For FPI and carry trade flows in EMs, a strong US dollar Index, high US bond rates with a sharp inversion of the yield curve, and sluggish equities markets all provide difficulties.
However, RBI will tightly control the rate of the upward trend, "added he.
"The RBI wants to avoid too much volatility in the USDINR and the rupee becoming an anomalously weak currency.
This indicates that they could keep selling USD even when the spot and forward rates reach new all-time highs. The path of least resistance would still be upward, so this might not change the pair's trajectory, Mr. Banerjee observed.
Early Asian trade saw the dollar index rise to a new two-decade high of 109.4, as the dollar's strength pushed other significant currencies to new lows and placed pressure on its equivalents in developing countries.
The US Federal Reserve Chair Jerome Powell cautioned on Friday that there would be "some pain" for individuals and companies since it would take time for the Fed to tame inflation, and today's moves extended those gains.
Carol Kong, the senior associate for currency strategy and international economics at Commonwealth Bank of Australia, told Reuters that Powell made it plain there was no dovish tilt as some market players had anticipated.
"I believe that for this week, the main central banks' more aggressive tightening cycles will be priced in by market players, and the (US dollar index) will climb much higher near 110 points."
The massacre in local stocks, with the Sensex plunging over 1,000 points, and the soaring cost of crude oil did not assist the rupee.
The crisis in Libya, increased demand amid skyrocketing natural gas prices in Europe, and predictions that OPEC will restrict supply if necessary to sustain prices all contributed to counterbalance a bleak forecast for growth in the United States.
At 0241 GMT, US West Texas Intermediate (WTI) crude futures increased $1.09, or 1.2%, to $94.15 a barrel, building on a 2.5% rise from the previous week.
The price of Brent oil futures increased by 89 cents, or 0.9%, to $101.88 a barrel, adding to a week-ago rise of 4.4%.
According to commodities experts at National Australia Bank, "oil prices were firmer amidst the persistent pressure on fuel demand from Europe's energy crisis, and supply bottlenecks."
Thirty-two people were murdered in violent skirmishes in the capital of Libya over the weekend, which raised fears that the nation would degenerate into a full-fledged conflict and once more impair the country's petroleum supply.
Both crude benchmark futures had traded lower before Federal Reserve Chairman Jerome Powell's harsh comments on Friday, in which he predicted that the United States would have a prolonged lackluster growth despite further rate increases. As a result, the dollar increased.
Comments Although a strong dollar holds down the prices of most commodities, and the undersupply problem in the oil markets will likely continue to sustain an upward tendency, according to CMC Markets analyst Tina Teng, who spoke to Reuters.