The rupee is likely to fall further after the dollar’s low on Thursday, as the US Federal Reserve hinted at more aggressive rate hikes to tame inflation.
The rupee opened at a record low of 80.2850 per US dollar, up from 79.9750 in the previous session.
The Fed raised interest rates by 75 basis points, in line with expectations. More importantly, it hinted that more rate hikes would come and rates would remain high through 2024. Asian currencies opened weaker, with the Chinese yuan falling below 7.10 against the dollar.
“After the Fed Reserve’s aggressive commentary, the rupee will fall,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
“The central bank’s intervention will remain crucial and they are expected to be in place all day. However, they may allow a shutdown for the pair above 80 today.”
Samir Lodha, director of QuantArt Market Solutions, estimated that more losses for the rupee lay ahead should the RBI decide to step back.
“Once RBI allows INR to trade above 80 on a consistent basis, I expect the rupee to rise towards 82.0 within a few months due to the trade deficit and due to the global recession and the tightening of money supply,” said Lodha. .
It is possible that “the rupee will continue to fall in value with the intervention of RBI to monitor it when necessary,” said Venkatakrishnan Srinivasan, founder and managing partner at Rockfor Fincap.
However, any potential intervention from RBI is less aggressive this time around, said Arnob Biswas, head of FX at SMC Global Securities.
“RBI may not be aggressive given the aggressive side of the Fed. On top of that, a significant drop in net liquidity in the system may justify this,” Biswas said.
Dilip Parmar, research analyst at HDFC Securities, said that “even if the RBI intervenes, it will be a temporary support and cannot change direction.”
Meanwhile, Kunal Sodhani, vice president of the global trading center at Sinhan Bank, said that “many option sellers can cause stop losses”
“Needless to say, however, it remains very important to see how the RBI action continues from here,” Sodhani said.