Finance
In early trade Wednesday, the rupee fell sharply against the US dollar after comments by Federal Reserve Chair Jerome Powell suggested that the central bank would tighten monetary policy to a greater extent than previously anticipated.
Following Powell’s comments, the US dollar index surged to a three-month high, causing emerging market currencies, including the rupee, to fall against the greenback.
The rupee was trading at 82.20 per US dollar at 09:40 a.m. IST, up from 81.92 per US dollar at the previous close. The Indian currency market was closed on Tuesday to celebrate Holi.
Powell stated during his semi-annual testimony before the Senate Banking Committee on Tuesday that the latest US economic data was stronger than expected, implying that the final level of interest rates would be higher than previously expected.
In order to reduce high inflation, the Fed has raised interest rates by 450 basis points since March 2022, marking its most aggressive tightening cycle in nearly four decades.
Higher US interest rates entice global investors to flock to the world’s largest economy, resulting in dollar strength. The dollar index, which compares the US currency to six rivals, was last at 105.79, up from 104.60 at 3:30 p.m. IST on Monday.
According to dealers, the Reserve Bank of India is likely to intervene and reduce rupee volatility through dollar sales around the 82.45-82.50 per dollar level.
“US Fed Chairman Jerome Powell strikes an uber-hawkish tone in his testimony to Congress pushing DXY above yearly highs. For USDINR, 81.80 acts as a support while 82.36 (last Friday’s high) first resistance to watch out followed by 82.55,” Kunal Sodhani, Shinhan Bank vice-president (Global Trading Centre) said.
According to a dealer with a state-owned bank, the rupee is seen in a range of 81.90-82.50 per dollar for the rest of the day.
Source:BS
