Rupee lost its charm compared to previous weeks

Though we have seen that the Rupee significantly outpaced other global currencies in the last few weeks or months, has finally lost its ground against the U.S. dollar exchange rate. The strong stable Indian government and Indian central bank took many significant steps to curb rising inflation and weakness in the rupee. We saw, other than in India most of the central banks failed to control the stability of inflation and currency depreciation, influenced by the high energy cost and food shortages in many parts of the globe. The war between Russia and Ukraine still continues for more than 6 months, adding fuel to the skyrocketing global energy prices by virtue of the global inflationary pressure pressure that has been witnessed.

Somehow, the Indian central bank managed to control the further devaluation of the currency in parallel with the higher inflationary pressure from essential and nonessential items.

Recently, we have seen most of the countries’ inflation numbers stand at a multi-year record high lagging far behind India, where U.S. inflation hit 40 year high.

In the last week, the U.S. FED chairman raised the interest rate by 0.75 percent preceded by two outsized hikes in a row with a shocking hawkish tone, to raise further in the next policy meeting. As a result, the dollar index surged to the record multi-year high of 113.22. Fear of recession and uncertainty in the world of financial markets crippled currency, commodity and equity markets last week. India also started to face a heavy decline in its currency value and lose its strong grip, recording a life low of 81.3262 to the dollar exchange rate.

Now eyes will be on the next meeting of the RBI MPC is scheduled during September 28-30, 2022. Though inflation numbers gradually started to decline in India due to the decline in energy and food prices. Now, it will be a challenging task for the R.B.I. governor of India to focus either on inflation or growth, influenced by the hawkish FED and other aggressive central banks.