HomeLatest NewsRupee depreciates sharply in response to Fed rate hike

Rupee depreciates sharply in response to Fed rate hike

‘Rupee, other currencies likely to continue pressure against dollar in near future’

‘Rupee, other currencies likely to continue pressure against dollar in near future’

The Indian rupee fell sharply against the US dollar on Thursday after the US Fed hiked rates by 75 bps and hinted at more rate hikes in the future. The rupee closed down 83 paise at 80.79 since Wednesday.

“After a super hawkish Fed and sell-off in equity markets, there was significant volatility in dollar shorts. The central bank does not seem to have intervened aggressively,” said Anindya Banerjee, Vice President, Currency Derivatives and Interest Rate Derivatives, Kotak Securities Ltd.

“However, in the coming session, we expect the RBI to step in and contain volatility. Hence, a range of 80.40 and 81.20 can be seen,” he said.

“We believe the dollar index could see a significant rise, implying that most major market currencies, including the rupee, should remain under pressure. If we start seeing rupee depreciation, then from the US dollar return perspective for FPIs, India will become attractive,” said Naveen Kulkarni, chief investment officer at Axis Securities Portfolio Management Services.

“We may witness a reversal of FPI flows in the near to medium term, which will increase market volatility. Higher interest rates in the US will force major central banks, including India, to raise interest rates to prevent pressure on their domestic currencies, and market multiples may contract with increased interest rates and cost of capital. We believe, in the near term, Indian equity markets may witness increased volatility,” he said.

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