Indian rupee hits record low on Fed rate hike worries

The Indian rupee plunged to a record low against the dollar on Monday, ahead of an expected US interest rate hike this week aimed at fighting surging inflation.

The rupee hit 78.2825 per dollar for the first time as a forecast-beating US inflation report on Friday heightened prospects for a further tightening of monetary policy by the Federal Reserve.

The benchmark Sensex Index slid as much as 2.1 percent as foreigners took out about $24 billion from local stocks, Bloomberg News reported.

The Indian currency has been weighed down by rising oil prices, a more aggressive Fed and by capital outflows in emerging markets as foreign investors turn risk-averse. Central banks have adopted more hawkish policies in recent months, including in India, with the Reserve Bank hiking borrowing costs by 50 basis points last week for the second time in as many months.

The RBI earlier announced an out-of-cycle 0.4 percent rate rise in May.

India’s central bank has also been selling off foreign currency to stabilise the currency.