Rupee may plumb to fresh low after hawkish Powell

The Indian rupee could slip to a record low against the dollar on Monday after Federal Reserve Chair Jerome Powell signalled that restrictive policy would be kept longer to bring down inflation.

The rupee is tipped to open at 80.00-80.10 per US dollar, compared with the previous session's close of 79.8650. The currency had hit an all-time low of 80.0650 last month.

The rupee will "most likely" see a record low, if not at open, then later during the session, a trader at a Mumbai-based bank said.

The S&P 500 Index plunged 3.4% on Friday and futures indicated another 1% fall for the US gauge. The dollar index reached its highest in two decades on Monday, the 2-year Treasury yield climbed to 3.46% and the offshore Chinese yuan fell to 6.9280 to the US currency.

"There has been overall reluctance to take the rupee below 80, but the extent of equity sell-off, the dollar's surge and the yuan's weakness should be enough to take the rupee below the psychological level," the Mumbai-based trader said.

A lot will "obviously" depend on the Reserve Bank of India and what it does at open, he added.

Asian currencies and equities tumbled on Monday after Powell said the US central bank would raise rates as high as needed and would keep them there "for some time" to bring down inflation near its medium-term goal. Read full story

Efforts to reduce inflation will bring "some pain" through a sustained period of slower economic growth and softening labour market conditions, Powell said.

Powell's speech at the Jackson Hole central banking conference in Wyoming underscored the Fed's commitment to stay the course on inflation, Morgan Stanley said in a note, adding that it now sees substantial upside risks of a 75-basis-point rate hike next month.

Fed funds futures now price in near 2-in-3 chance that the Fed will raise rates by 75 basis points at its September meeting. Powell repeated on Friday that the size of the rate hike next month was data-dependant.