The rupee dropped to a new Intraday low of 80.12 in the Interbank foreign exchange market on Monday, reacting to the US Federal Reserve chairman hawkish statements promising restrictive policy action to cool prices.

The dollar index rose to the highest level in 20 years as most currencies weakened against the greenback. However, large-scale selling of dollars by the RBI helped the local currency regain to close at 79.97, 10 Paise below Friday’s close of 79.87. The rupee had breached 80 for the first time on July 19. Intervention by the RBI and resumption of investments by foreign portfolio investors (FPIs) helped it remain around 79 levels for most of August.

Powell, said restoring price stability will likely require restrictive policy stance for some time pushing back against expectations that the elevated interest rates be short-lived. Powell’s statement was followed by a comment from a European Central Bank official who said that the ECB may have to hike rates even if it means having to risk a recession.