Rupee Takes Dual Hit from Fed Rate Hike Expectations and Soaring Oil Prices
The Indian rupee is set to open weaker on Monday as traders expect the US Federal Reserve to raise interest rates further, fueled by hawkish comments from Fed Chair Kevin Warsh.
Warsh's remarks pushed up expectations of a rate hike at the September 15-16 meeting to around 60%, up from 35% previously. This increase in dollar demand lifted the value of the US currency and Treasury yields, while weighing on risk assets globally.
The rupee is also under pressure from rising oil prices, which have climbed towards $90 a barrel due to renewed tensions in the Strait of Hormuz. India imports most of its crude, so higher import costs will increase demand for dollars and put downward pressure on the rupee.
Traders are watching the Reserve Bank of India's (RBI) defense zone around 95.70-95.80 USD/INR, where the central bank is expected to intervene to prevent further depreciation of the currency.