Rupee may trade in the 79.75 - 80 per dollar band in the foreseeable future : Bank of Baroda

2 Sept 2022 , 11:46 AM

Research from the Bank of Baroda (BOB) predicts that the Indian rupee would trade in the range of 79.75 to 80 versus the US dollar in the near future since the US Federal Reserve Chair has made it apparent that higher interest rates are likely to remain.

This will maintain pressure on all major currencies, including the INR. Even though FPI flows have been positive since August 22, increasing US interest rates and a weakening global economy might trigger another round of FPI exodus from the Indian market. Positively, if rising rates push the global economy into a slowdown if not recession, oil prices may see some correction.

With strong intervention from the central bank to stop its rapid collapse, the rupee has mainly held constant during the past two weeks. Powell's remarks put the rupee under pressure. In addition to the dollar's rise, other factors have made the rupee's recent decline even more pronounced.

Most international currencies have seen a steep decrease following the speech by Fed Chairman Jerome Powell, while the dollar index, which measures the dollar's strength against a basket of six currencies, has increased by 2.2% over the past two weeks.

According to the research, the Japanese yen has experienced the greatest fall as the BoJ's and other central banks' growing policy divergences continue to put pressure on the currency.

In the midst of a spiraling cost-of-living crisis that is predicted to send the UK into a recession, the pound has dropped sharply by 3.2%. The euro has also been losing ground versus the dollar. In addition, the yuan is still under pressure as the economy continues to deteriorate due in large part to the ongoing real estate crisis.

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