Why is the rupee so weak in the markets in last few days?

On Monday, there was a sharp slump in the rupee as it touched a life time low of Rs.77.58/$ before closing the day at Rs.77.50/$. Rupee was nearly 60 paisa weaker on Monday and has lost around 115 paisa in just two trading sessions. The big reason has been the sharp strengthening of the Bloomberg Dollar Index (DXY) to above 104 levels, especially in the aftermath of the Fed hiking rates by 50 bps and guiding for 200 bps more this year.

Apart from the intrinsic dollar strength, the sharp outflows by FPIs has also led to a run on the rupee. FPIs pulled out more than Rs.1.70 trillion in the last 7 months of the year. In addition, banks and oil companies rushed to buy dollars and hedge their dollar exposures. While crude has also impacted the rupee, it has stabilized around $100/bbl and is likely to remain stable as Europe eases restrictions on Russian oil.