Mumbai: Rupee sinks to record low 80.86 against dollar

Mumbai: The rupee settled 1.1% lower at a record closing low of 80.86 to a dollar on Thursday, posting its biggest single day fall since Feb 24.

The Indian currency, after managing to avoid the drop below 80 several times since the Russia-Ukraine war began, finally succumbed on the back of a surging dollar after the US Federal Reserve raised its rates by 75 bps on Thursday and held out the prospect of sharper hikes in coming months.

This was the third straight increase of 75 bps (100 bps equals a percentage point) by the Federal Open Market Committee. So far this year, the committee has raised the rate by 3% over five meetings.

A median of Fed officials' projections showed rates peaking at 4.50-4.75% next year with no cuts likely until 2024.

The rupee was the second worst performer among Asian currencies after South Korea’s won. The dollar index, which measures the strength of the greenback against a basket of six major currencies, surged to a fresh two-decade high of 111.81.

The Indian currency started the day at an unprecedented low of 80.2850 a dollar tracking global strength in the US currency. Globally, investors turned risk-averse due to concerns that aggressive rate hikes by the Federal Reserve to curb inflation might push the US economy into a recession, boosting demand for the dollar, a safe haven asset.