The rupee fell to a new low against the dollar on Friday, as market sentiment remained negative in the backdrop of a steadily strengthening dollar. The greenback has risen significantly in recent days as the Federal Reserve indicated a relatively long hiking cycle.

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In the opening few minutes of trading on Friday, the rupee hit a fresh intraday low of 81.25 per US dollar. The domestic currency was trading at 81.13 at 9:25 a.m. IST. On Thursday, the rupee fell 1.1% against the dollar, finishing at a historic low of 80.87 per dollar.

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So far in 2022, the local unit has fallen 8.5% against the US dollar. The US dollar index, which has increased by more than 16% so far in 2022, was last at 111.41 vs 111.16 on Thursday.

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Government bonds also continued Wednesday’s strong losses, with the 10-year benchmark bond yield last trading 7 basis points higher at 7.38%. Bond prices and yields move in opposite directions. Bond yields hardened in tandem with a rise in US Treasury yields.

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The rupee had been outperforming other developing market currencies before Thursday’s dramatic decrease because of a resumption of foreign equity investment, a drop in crude oil prices, and active market interventions by the RBI.

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The rupee has suffered more recently than other emerging market currencies, raising the possibility that the central bank was giving the currency some time to cope with the new situation of US interest rates remaining higher for longer. The RBI’s foreign exchange reserves are now at a two-year low of around $550 billion after market interventions since late February.