The Indian rupee continued to slide on Monday to close at a fresh record low of 81.67 against the US dollar.
At the interbank foreign exchange market, the local currency opened at 81.47 against the greenback, then fell further to close at an all-time low of 81.67, registering a decline of 58 paise over its previous close. This is the fourth consecutive session of loss for the domestic currency.
The free fall of the Indian rupee comes at a time when India's forex reserves have dropped by $5.22 billion to $545.65 billion in the week to September 16, data from the Reserve Bank of India (RBI) showed on Friday.
However, the rupee is not the only currency that has weakened against the US dollar. Pound sterling plunged as much as 5% versus the US dollar to a new low of $1.0327, breaking below 1985 lows as confidence in Britain's economy weakened.
This also comes in the backdrop of a record rise in the dollar after the U.S. Federal Reserve raised the key policy rate by 75 basis points (bps) for the third straight time last week. The Fed has vowed to continue with its "aggressive" policy stance to curb inflation. It expects the policy rate to rise to 4.4% by year's end and 4.6% by the end of 2023.
The Bank of England too had raised key interest rates by 50 basis points to 2.25% from 1.75%. It is the 7th consecutive hike by the BoE, raising the key policy rates to their highest level since 2008.
The Reserve Bank of India's monetary policy committee is expected to hike the key policy rate by another 50 basis points to 5.9% in its policy meeting this week. RBI governor Shaktikanta Das-led six-member monetary policy committee (MPC) is scheduled to meet during September 28-30.
Earlier this month, Das said that the Indian rupee has moved in an orderly manner in the ongoing financial year and held its own in a world of sharp depreciation across other currencies of emerging market economies and advanced economies.
"Our endeavour amidst the extraordinary events unfolding globally on an ongoing basis has been to anchor expectations and allow the exchange rate to reflect the fundamentals rather than overshoot," he said.
Meanwhile, global oil benchmark Brent crude futures plunged to an 8-month low on Monday as the U.S. dollar hit its strongest level in more than two decades and on fears rising interest rates will tip major economies into recession, cutting demand for oil.