Indian rupee strengthens against US dollar after US Federal Reserve’s interest rate hike. The rupee ended 7 paise higher at 81.93 compared to the previous close of 82.00. The dollar index, measuring the greenback’s strength against a basket of currencies, declined 0.19% to 100.69.
The US Federal Reserve raised interest rates by 25 bps, setting a target range of 5.25-5.5%, the highest since 2001. Despite the rate hike, the rupee gained due to the weakened US dollar and positive performances in Asian and European markets, supported by stimulus talks from China.
However, analysts are cautious about the rupee’s future prospects, citing concerns over potential hawkish stances from key global central banks to combat inflation and rising crude oil prices. They expect the rupee to trade with a slight negative bias, with month-end dollar demand from importers and fears of a global economic slowdown potentially weighing on the currency. On the positive side, FII (Foreign Institutional Investors) inflows may provide support at lower levels.
The domestic equity market witnessed weakness, which limited significant gains in the rupee. Crude oil prices also surged, with Brent crude futures rising to $83.55 a barrel and US West Texas Intermediate (WTI) crude reaching $79.56. Amid broadly positive global cues, the domestic equity benchmark indices ended over half a percent lower on the last day of the Nifty’s July series futures and options (F&O) contracts.
Market participants remain vigilant about ongoing economic developments and global factors, which could influence the rupee’s movement in the near term. The USD/INR spot is expected to trade within the range of 81.50 to 82.30, depending on various factors impacting the currency market.