The rupee marked its first weekly loss in five weeks amid Fed expectations boosts dollar

The rupee marked its first weekly loss in five weeks amid Fed expectations boosts dollar

Ira Singh
24th April’23

The Indian rupee marked its first weekly loss in five weeks against the US dollar, as the Federal Reserve’s outlook for interest rates boosted the greenback, causing a sell-off in emerging market currencies.

The rupee finished at 82.09 per U.S. dollar compared with 82.1475 in the previous session. For the week, it lost 0.30%, falling for the first time since the week ended March 17, according to estimates.

According to recent reports,the dollar index is set for its biggest weekly gain since February amid expectations that Fed would hike rates by 25 basis points next month, following mixed inflation and retail sales data.

The decline in the rupee came as the Federal Reserve signaled a shift towards a more hawkish stance at its policy meeting last week.

According to the official data released in 2022,the central bank raised its median projection for interest rates in 2023 to 0.6% from the previous estimate of 0.1%, and indicated that it could start raising rates in 2022, earlier than previously expected.This sparked a rally in the dollar, as investors bet that the US economy would recover faster than its peers, and that higher interest rates would attract more capital flows into the country.

The dollar’s strength is also fueled by concerns over rising inflation in the US, which could prompt the Fed to tighten monetary policy sooner than expected. This has led to a sell-off in emerging market currencies, which are seen as riskier assets, and tend to suffer when global investors turn cautious.

The rupee has been one of the worst-performing emerging market currencies in 2022, having lost more than 3% against the dollar since January, in the year. Analysts expect the currency to remain under pressure in the near term, as the Fed’s shift towards a tighter policy stance continues to support the dollar, according to reliable sources.

However, some experts believe that the rupee could rebound later in the year, as India’s economic recovery gathers momentum, and the country attracts more foreign investments. The recent drop in oil prices could also help the country’s current account balance, and reduce the pressure on the rupee.

In conclusion, the Indian rupee marked its first weekly loss in five weeks against the US dollar on Friday,amid tepid risk appetite,but snapped a four week winning streak,as the Federal Reserve’s outlook for interest rates boosted the greenback and caused a sell-off in emerging market currencies. While the rupee could face further pressure in the near term, some experts believe that it could rebound later in the year, as India’s economic recovery gathers pace.

Experts take:
The Indian rupee has not exhibited the expected weakness following a breakout near 82.15 ,but the bias and drift remain towards further decline as long as it trades above 81.83, according to reliable sources.