Indian Rupee Slips to Record Low as 'Hawkish' US Fed Stance Hurts Asian Currencies

US Federal Reserve chairman Jerome Powell issued a stark message on Friday, indicating that the Fed will continue to raise interest rates in the coming months to tame inflation which is at its highest level in four decades.

Asian currencies have registered a significant fall, with the Indian rupee touching a record low against the US dollar on Monday as the US Federal Reserve signaled a longer duration of higher rates to tame soaring inflation.

Indian rupee fell to 80.135 against the greenback in the opening hour before the Reserve Bank of India reportedly intervened in the currency market by selling the US currency to arrest the fall.

Indonesia's rupiah and the Philippine peso weakened 0.4 percent and 0.1 percent, respectively, and Singapore's dollar touched a one-month low against the US dollar. South Korea's won declined 1.4 percent to its lowest level in more than 13 years.

"The dollar index, which tracks the currency against six major peers, strengthened after hawkish statement given by the Fed chairman that the bank would raise interest rates aggressively to curb the inflation," Anuj Gupta, the vice-president of IIFL Securities Ltd, told Sputnik.

In July, the US Federal Reserve raised interest rates for the fourth time this year to curb rising inflation.

The dollar index is trading above 109, which is a 20-year high against a backdrop of safe-haven demand and rising Treasury yields. The expert assessed that the dollar index might touch the 112 level in the coming weeks. "The Indian rupee may fall further till 81 to 82 levels," Gupta added.

Uday Kotak, chief executive of India's Kotak Mahindra Bank compared the "firm" decisions of US Fed chairman Jerome Powell with the policies of his predecessor, Paul Volcker who, as chairman of the central bank, adopted an aggressive stance to tackle high inflation in the Seventies and early Eighties.

"Federal Reserve chairman Powell finally spoke firmly to fight inflation. It reminds us of Paul Volcker, who broke the back of US inflation in the Seventies/Eighties. Watch out for Quantitative Tightening. The US rules the financial world. Complacent markets will wake up and smell the coffee!" Kotak said.

Powell said households and businesses would have to bear "some pain" in curbing high commodity prices. He also warned people searching for jobs in the US by saying that reducing inflation would probably require a sustained period of below-trend growth.