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Rupee Plunges 75 Paise In Trade As US Fed Sends Rate Tremors

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The rupee plunged 75 paise in trade as the US Fed hinted at earlier than expected interest rates hikes, which is as early as 2023. This led to global stocks coming under pressure and emerging market currencies witnessing a fall.

 
Rupee Plunges 75 Paise In Trade As US Fed Sends Rate Tremors

The Indian rupee closed at 74.08, down almost 1% or 75 paise in trade.

 

"Rupee fell sharply in today's session after the Federal Reserve released its policy statement, wherein it held rates unchanged but turned a little hawkish in its commentary. The Federal Reserve Chairman said that there had also been initial discussions about when to pull back on the Fed's $120 billion in monthly bond purchases, a conversation that would be completed in coming months as the economy continues to heal. Today, from the US, Philly fed manufacturing and weekly unemployment claims and better-than-expected economic data could further strengthen the dollar. We expect the USDINR (Spot) to trade with a positive bias and quote in the range of 73.70 and 74.30," said Gaurang Somaiyaa, Forex & Bullion Analyst, Motilal Oswal Financial Services.

Analysts see the rupee continuing to remain volatile in the coming days, though there is a possibility of intervention by the Reserve Bank of India. The fall in the rupee could also lead to fuel prices hitting new record peaks.

Sys Madhavi Arora, Lead Economist, Emkay Global Financial Services, "INR leads the EM Asia FX pack in losses today as the markets digest the hawkish FOMC with the median dot chart now indicating two rate hikes in 2023. This has help push the broad dollar up another 0.7% today (currently at 91.65), implying pressure on EM currencies, led by high beta ones. This comes in conjunction with RBI's reiteration of its FX stance in yesterday's bulletin, where it indicated that FX reserves are still not adequate enough when seen in the light of cross country comparison ratios, high net international investment position of (-)12.9% of GDP and random shocks amid heightened global uncertainty -- all of it implying that RBI's tactical FX intervention in FX will be biased towards dollar purchases, keeping INR subdued/EM underperformer even in case of healthy EM flows."

Read more about: rupee dollar forex
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