The Indian rupee is
expected to be under pressure on Thursday and could weaken past
the 96-per-dollar handle after the US Federal Reserve raised
interest rates and signalled that further tightening is in the
pipeline.
The rupee is expected to open slightly weaker
around 96-96.05 per dollar, down from its previous close of
95.9550.
The Fed raised interest rates by 25 basis points on
Wednesday, its first increase since 2023, with officials
expecting one more increase this year. The hike pushed the
dollar index above the 100 mark to its highest level in more
than a month.
Asian currencies slipped on Thursday, while equities traded
mixed as investors digested the prospect of higher global
borrowing costs. The Fed’s hike follows a rate increase in
Europe last week and precedes an anticipated rise in Japan on
Friday, as central banks globally grapple with rising inflation.
“There are no immediate signs for inflation to ease,
especially given the stalemate in the Middle East. This means
the Fed may need to continue to tighten in order to achieve its
target,” Tai Hui, APAC chief market strategist at J.P. Morgan
Asset Management, said in a note.
Futures imply about a 50 per cent chance of another Fed hike next
month to rein in inflation. A total of three rate increases have
been priced in for this tightening cycle.
The rate outlook is expected to add to pressure on the
rupee, already weighed down by elevated oil prices and foreign
portfolio outflows from Indian stocks and bonds.
Traders said that inflows linked to the IPO of India’s
largest stock exchange, along with interventions by the Reserve
Bank of India, could help cushion the rupee. However, sentiment
may worsen if the currency weakens past 96 and remains there,
they added.
The National Stock Exchange of India (NSE) will open for
subscriptions on Thursday after allocating shares worth $703
million to anchor investors on Wednesday.