Fed Interest Rate Hike Impact: Treasury Yields Pullback, Risky Assets Rally

The Rupee consolidated in a narrow range after the important FOMC policy statement that was released last night, according to Mr. Gaurang Somaiya, Forex and Bullion Analyst, MOFSL. The Federal Reserve in its policy statement raised rates by 75bps its largest interest rate increase in more than a quarter of a century to stem a surge in inflation.

"The yield on benchmark 10-year Treasuries pulled back to 3.291%, down from an 11-year peak of 3.498% struck earlier this week. Fed Chair said that either a 50- or 75-basis-point rate increase at its next policy meeting in July seemed most likely, and that the economy is strong enough to handle tighter policy. Fed projection showed economic growth slowing to a below-trend rate of 1.7%, and policymakers expecting to cut interest rates in 2024.

Dollar retraced and riskier assets rose after the release of the FOMC policy statement. On the other hand, The European Central Bank promised fresh support for the bloc's indebted southern rim tempering a market rout that threatened a repeat of the debt crisis that almost brought down the euro near decade low. Today, focus will be on the Bank of England policy statement and a hawkish commentary could keep the pound supported at lower levels. We expect the USDINR(Spot) to trade with a positive bias and quote in the range of 77.70 and 78.40," Somaiya noted.