The rupee sank to an all-time low of 77.58 against the US dollar amid flight of foreign investors from Indian assets after the Federal Reserve hiked interest rates.

 The Indian currency ended Monday at 77.50 per dollar, down 60 paise from the previous day’s close.

 The earlier record closing for the rupee was 76.98 per dollar on 7 March.

 The dollar strengthened against other major currencies as well, including the Chinese yuan and the Japanese yen. Last week, the US Federal Reserve had initiated a 50-basis point rate hike, with more to follow. The dollar index has reached a 20-year high at 104.07. The 10-year US yield has also been climbing, gaining 14 basis points over the last couple of days.

 With US hiking interest rates, foreign institutional investors (FIIs) tend to migrate from the Indian equity market. Their net sales in 2022 have been Rs 1.3 lakh crore so far. India will be further worried as it imports 85% of its oil requirements. A high inflation in India will trigger further FII selling from domestic securities. This, in turn, will keep up the pressure on the rupee.

 The rupee, experts predict, could be trading in the range of 78-79 against the dollar in the coming months. “Led by adverse global cues, the rupee is trading shy of 77.50 -- nearly 2% lower from highs of near 75.99 levels witnessed last week post the surprise rate hike by RBI. Given the uncertainty and limited RBI intervention, USD/INR could trend towards 78 levels in the immediate near term. We expect the new USD/INR near-term range of 76.50-78,” said Upasana Bhardwaj, senior economist at Kotak Mahindra Bank.

 The ‘zero Covid’ policy of the Chinese government is disrupting supply chains and is likely to dim chances of global growth coming back in full. The effects of the lockdown were seen as China’s export growth slowed to single digits in April, as curbs halted factory production, disrupted supply chains and trigged a collapse in the domestic demand. The war in Ukraine is also not helping.

 “For the week ahead, the rupee needs to reclaim levels of 77.10 to see a recovery towards 76.80/76.70 again. The bias will stay negative until then, and the currency will see further depreciation towards 77.80 levels," analysts at Emkay Global Financial Services said.

 Last week, the RBI hiked the repo rate by 40 basis points to 4.40% while the cash reserve ratio would be raised by 50 basis points to 4.50% from 21 May.