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Rupee sheds 0.3% as US dollar soars ahead of Fed’s policy statement

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The rupee weakened 0.3 per cent versus the on Wednesday as the greenback strengthened globally ahead of a likely 75-basis-point rate hike by the US Federal Reserve, dealers said.

The rupee settled at 79.98 per as against 79.76 per dollar at previous close. So far in 2022, the rupee has depreciated 7.1 per cent against the . Wednesday’s value was just 1p from the record closing low of 79.99 per US dollar on July 20.

In its policy statement scheduled late Wednesday, the Federal Reserve is expected to raise interest rates by at least 75 bps, with close to 30 per cent of traders in federal funds futures pricing in a 100-bps hike.


The Fed has already raised rates by 225 bps so far in 2022. Higher US interest rates lead to a rise in the country’s bond yields and a stronger dollar. This exerts pressure on emerging market currencies such as the rupee.

The US dollar index, which measures the greenback against six major currencies, was at 110.58 as against 109.76 at the end of last week. Risk appetite also took a turn for the worse after Russian President announced partial military mobilisation in the country’s ongoing conflict with Ukraine.

“The dollar appreciated against major currencies ahead of an expected interest-rate hike by the Federal Reserve and as Russia’s escalation of war enervated investors’ appetite for risk,” research analyst Dilip Parmar said.

“With a third 75-basis-point rate hike by the Federal Open Market Committee widely expected, some investors have moved to price in an even larger increase. Spot USD/INR is placed at the upper band of a range and sustainable trade above 80 per dollar would open (the possibility of the rupee weakening to) 80.70 in the near term,” he said.


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