Bombay - (AFP) - The exchange rate of the Indian currency fell to more than 80 rupees to the dollar, for the first time on Tuesday, at a time when the dollar strengthened its position and the inflow of foreign capital abroad increased.

Bloomberg data showed that the price of the rupee reached 80.0600 against the dollar shortly after the start of trading.

The high level of inflation and interest rates in the United States, coupled with fears of an imminent economic recession in the largest economy in the world, led to a rise in the price of the dollar in recent weeks at a time when investors are trying to avoid risks.

Tightening US monetary policy has exacerbated capital outflows from emerging markets such as India, where foreign investors have pulled out a net $30.8 billion in debt and equity this year.

Data published last week showed that inflation in consumer prices in the United States recorded a new level in June, the highest in four decades, exceeding market estimates and reinforcing expectations that the Federal Reserve will raise interest rates significantly next week.

In a written statement addressed to parliament on Monday, Indian Finance Minister Nirmala Sitharaman attributed the significant decline in the rupee to external causes.

It stated that "international factors such as the Russian-Ukrainian conflict, high crude prices and tightening global financial conditions are the main reasons for the decline of the Indian rupee against the US dollar."

She added that, however, the Indian currency improved against the pound sterling, the Japanese yen and the euro during the year 2022.
However, the rise in crude prices led to the deterioration of the trade balance in a country that imports 80 percent of its oil needs.

India's merchandise trade deficit widened to a record $26.18 billion in June, official data revealed last week, mainly due to higher costs of importing crude and coal.

In its monthly economic review, the Finance Ministry said that the rising costs of imports would exacerbate the current account deficit and further depreciate the rupee.

Consumer price inflation in India, the world's sixth largest economy, fell slightly to 7.01 percent in June, after hitting an eight-year high of 7.79 percent in April.

However, the rise in prices remained above the target of 2 to 6 percent set by the Central Bank, despite raising interest rates in May and June.

Also, the central bank sold more than $34 billion of its foreign exchange reserves in hopes of keeping the rupee stable.