As rupee closes at record low, experts warn fast pace of depreciation will impact inflation

The rupee extended its losses and slumped 60 paise to close at a record low of 77.50 (provisional) against the US dollar on Monday, pressured by the strength of the American currency overseas and unabated foreign fund outflows.

Many Asian and emerging currencies have fallen led by yuan. The Yuan is at lowest since October 2020. The PBoC is allowing it to fall since they aren’t able to cut rates. Yuan in turn is dragging down baht, Philippine peso, South African rand and Indonesian rupiah.

India has fallen more because it is more vulnerable to higher crude prices - we are one of the highest importers of oil. Separately India’s trade deficit has also been ballooning to USD 20 billion per month even before the crude surged.

This year the, current account deficit could also be over 3 percent; RBI's comfort zone is 2.5 percent. Also Balance of payment is likely to be in deficit due to strong FII outflows.

And then US dollar has been rising inexorably and so are US yields - indicating massive risk off.  US April jobs data is also very strong at 4,28,000 vs estimates of 4,00,000. Also US consumer credit in March was up USD 52 billion which is double the estimate of economists. This means Fed will be hawkish.

Experts say the rupee may see an accelerated 'catch-up' fall to 79 per dollar.

It is also leant that RBI doesn’t want the rupee to fall below 77.5 against the dollar.

To decode the road ahead for the rupee, CNBC-TV18 spoke to, Sastry Venkataramana, Deputy MD of Global Markets at SBI; Neeraj Gambhir, Head of Treasury & Markets at Axis Bank and Kaushik Das, Chief Economist at Deutsche Bank.