Rupee is expected to weaken as US debt uncertainty raises the dollar

24 May 2023 , 09:51 AM

The ongoing standoff over the U.S. debt ceiling has dampened risk appetite and increased demand for safe-haven assets like the dollar, which is projected to cause the Indian rupee to weaken on Wednesday.

The rupee is expected to open at approximately 82.85-82.87 to the US dollar, down from 82.80 in the previous session, according to non-deliverable forwards.

Concerns over the US debt ceiling led to the greatest decrease in the S&P 500 Index in three weeks, which in turn led to a decline in Asian currencies and stocks. Near 103.50, the dollar index was trading.

Representatives of U.S. President Joe Biden and congressional Republicans failed to reach an agreement during another round of debt ceiling talks on Tuesday with the deadline to raise the borrowing limit approaching.

During American trade hours, the Federal Reserve’s May meeting minutes are due. The minutes come amid discussion about whether the U.S. central bank would hike rates once more in June or decide to take a break.

Economic indicators from the United States have shown a robust economy, and Fed members have been generally hawkish, increasing the likelihood of a rate hike in June to close to 30%.

Data released on Tuesday showed how strong the American services industry is. S&P Global’s flash U.S. Services PMI Index increased to 55.1 on Tuesday, the highest level since April of last year, according to a survey.

For feedback and suggestions, write to us at [e-mail]