Rupee Falls Past 96 Per Dollar After Fed Rate Hike, Rising Oil Prices Add Pressure
The rupee breached the 96-per-dollar level for the first time since July on September 17 after the US Federal Reserve raised interest rates and signalled the possibility of additional monetary tightening. The domestic currency was trading at 96.03 against the dollar after closing the previous session at 95.95. The decline followed the Fed’s decision to increase its benchmark interest rate by 25…
On September 17, the Indian rupee dropped below 96 per US dollar for the first time since July, following a decision by the US Federal Reserve to raise interest rates. The rupee closed the previous session at 95.95 but fell to 96.03 against the dollar. The Federal Reserve increased its benchmark interest rate by 25 basis points to 3.75%-4%, signaling potential further rate hikes this year to combat inflation. This move has strengthened the dollar and put pressure on emerging market currencies like the rupee.
Finance Minister Nirmala Sitharaman has called for the Reserve Bank of India (RBI) to accelerate its digital currency initiatives and strengthen the capabilities of the digital rupee. Global inflation concerns and high crude oil prices have also contributed to the rupee's decline. The Bank of Japan and the European Central Bank have followed suit, tightening their monetary policies.
Amit Pabari, managing director at CR Forex Advisors, predicts the rupee may move above 96.00, potentially reaching 96.30 to 96.50 in the near term. Brent crude prices eased slightly to around $105.69 per barrel but stayed above $100 due to concerns over supply disruptions caused by ongoing tensions in West Asia.
The combination of higher crude prices, inflation risks, and capital outflows from foreign investors has put additional pressure on the rupee. The Federal Reserve's latest decision could also raise expectations of a rate hike by the Reserve Bank of India during its October monetary policy meeting. Analysts believe the global rate outlook may continue to negatively impact the rupee in the near future.
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