Rupee Weakens as Fed Hike Adds to Inflation Pressures

The Indian rupee is facing pressure due to the hawkish stance of the US Federal Reserve, which raised interest rates for the first time since 2023. The Fed increased rates by 25 basis points and signaled further tightening in the pipeline, pushing the dollar index above the 100 mark.

This move has significant implications for the rupee, which is already struggling with elevated oil prices and foreign portfolio outflows from Indian stocks and bonds. Traders expect the rupee to open slightly weaker around 96-96.05 per dollar, down from its previous close of 95.9550.

According to Tai Hui, APAC chief market strategist at JPMorgan Asset Management, there are no immediate signs for inflation to ease, especially given the stalemate in the Middle East. This means the Fed may need to continue to tighten in order to achieve its target.