As the U.S. Federal Reserve prepares for a significant rate rise to quell inflation concerns, the Indian rupee recorded its worst closing value ever versus the dollar on Wednesday. The rupee fell from 79.75 the previous day to settle at 79.9750 against the dollar. The rupee depreciated throughout the session, beginning the day slightly lower at 79.79.
Vladimir Putin’s mobilization of soldiers increased pressure on the rupee, which was already under strain from the rising dollar index. The dollar index increased to 110.87, a two-decade high. Demand for the dollar increased as a result of the Fed’s interest rate forecast and a lack of risk appetite.
The Fed is anticipated to increase rates by 75 basis points later in the day, marking the third consecutive increase of this magnitude. There is a slim chance that the Fed will decide to raise interest rates by 100 basis points. Investors will be watching Fed Chair Jerome Powell’s news conference and the updated predictions from officials on the future trajectory of interest rates in addition to the rate decision.
According to a report from DBS Group Research, “look for Fed Chair Jerome Powell to reiterate the message that the fight against inflation is far from finished.” The research firm noted that the rupee has regularly outperformed numerous regional counterparts in the middle to higher quartile of the Asian FX pack on a year-to-date basis, which is bullish for the currency.
It stated that “shifts in global risk emotions, the impending Fed rate decision and rising US real rates are under scrutiny.” Given the upward surprise in U.S. inflation statistics in the run-up to the announcement, traders have increased their forecasts for the peak in Fed rates. The terminal rate prediction has now increased to about 4.50% from close to 4% at the end of August. On Wednesday, Indian stocks fell, although once again, the declines were slight when compared to other Asian indicators.
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