The rupee crashed on Wednesday to end a touch below 80 per dollar after briefly hitting that level as the greenback hit a new two-decade high driven by the expected Fed lift-off and safe-haven flows after Russia warned of an escalation in its war efforts against Ukraine.
Bloomberg showed the rupee was last changing hands at 79.9788, after hitting an intra-day weak level of 80.0137, compared to its previous close of 79.7563.
Reuters reported that the Indian rupee closed at its lowest level ever against the US currency on Wednesday. The rupee closed at 79.9750 per US dollar, down from 79.75 in the previous session after it opened a tad lower at 79.79 and continued to toil lower through the session, said Reuters.
But PTI showed the domestic currency fell 26 paise to close provisionally at 80.00 against the US dollar.
“The dollar appreciated against major currencies ahead of an expected interest rate hike by the Federal Reserve and as Russia’s escalation of war enervated investors’ appetite for risk,” Dilip Parmar, Research Analyst at HDFC Securities, told PTI.
The crash in the rupee coincided with a dollar surge to a 20-year high as markets were alarmed by Vladimir Putin’s remarks in addition to expectations the US Fed prepared to raise interest rates again swiftly.
Reuters reported that Russian President Vladimir Putin issued the country’s first call to mobilise since World War Two, warning the West that if it kept up its “nuclear blackmail,” Moscow would retaliate with the full force of its huge arsenal.
That news pushed the dollar index, which evaluates the greenback’s performance against a basket of currencies, to rise by over 0.5 per cent to 110.87, a record high since 2002.
As a result of Putin’s remarks, which increased worries about the economic prospects for a region already severely hampered by Russia’s restrictions on gas supply to Europe, European currencies took the brunt of selling on foreign exchange markets.
The euro dropped to $0.9885, a two-week low, and is now approaching the two-decade lows seen earlier this month. At $0.9912, it was last down 0.6 per cent.
“The Russia headlines are stealing the thunder from the Fed at least for now,” Societe Generale currency strategist Kenneth Broux told Reuters.
“A concern about an escalation in the conflict is hurting European currencies. And if the Fed is also hawkish tonight, then you could see the losses snowball.”