Finance
The rupee gained the most in a single day since October 20 of last year, as a weak US GDP reading led to speculation that the Federal Reserve would slow the pace of its rate hikes.
On Friday, the domestic currency closed at 79.27 per dollar, down from 79.76 on Thursday. Throughout the day, the rupee moved closer and closer to the 78-per-dollar mark, reaching a high of 79.17.
According to data released after Indian trading hours on Thursday, the US economy contracted by 0.9% in the second quarter of 2022. This was the second consecutive quarter in which the American economy contracted. Some economists defined a recession as two consecutive quarters of economic contraction.
The US GDP data came a day after the Federal Reserve raised interest rates by 75 basis points, bringing the total number of rate hikes in 2022 to 225.
While the Fed has signaled more rate hikes to combat high inflation in the United States, growing concerns about slowing economic growth have increased speculation that the central bank will slow the pace of rate hikes. The revised view on the Fed’s rate hike pace resulted in a sharp drop in the US dollar index, which measures the US currency against six major rival currencies.
According to Bloomberg data, the US dollar index fell to a low of 105.42 on Friday. Earlier this month, the index reached a 20-year high of 108.54.
The Fed’s aggressive pace of monetary tightening this year, combined with the resulting dollar strength, has resulted in an exodus of foreign funds from Indian equities, putting significant pressure on the rupee this month. The rupee fell to a lifetime low of 80.06 to the dollar on July 19.
Source:BS
