On Monday, the Indian rupee experienced a decline, reaching an unprecedented low at the market's opening, driven by concerns that the risk aversion stemming from fears of a U.S. recession could result in capital outflows.

The rupee commenced trading at 83.78 against the U.S. dollar, a decrease from the previous closing rate of 83.75, and fell below the historical low of 83.7525 recorded on Friday.

The selloff in U.S. and Asian stock markets, triggered by a disappointing jobs report, heightened fears of foreign capital withdrawal from India and other emerging economies.

According to a trader at a public sector bank, this significant selloff may compel the Reserve Bank of India to allow the USD/INR exchange rate to rise to 83.90. Futures for the S&P 500 Index declined by 1.5%, compounding Friday's losses. In Asia, South Korean and Japanese markets led the downturn, with losses reaching as high as 5.6%.

Japan's Nikkei index has entered a bear market, having fallen over 20% from its peak in July. Following the weak U.S. jobs report, investors abandoned riskier assets in favor of U.S.

Treasuries, as the July non-farm payroll figures significantly underperformed expectations, previous month’s data was revised downward, and the unemployment rate surged to a near three-year high.

ANZ Bank noted that the July labor market report had unsettled markets, with the pace of non-farm payroll additions now falling below pre-pandemic averages.

The bank further commented that the narrative of a soft landing is now in doubt, raising concerns about whether the Federal Reserve is lagging in its rate-cutting strategy.

Investors are anticipating substantial rate cuts from the Fed, with futures suggesting a strong likelihood of a 50 basis point reduction at the upcoming September meeting and approximately 115 basis points of cuts across the remaining three meetings this year.

This situation has driven the dollar index down to its lowest level since mid-March.