After the US Federal Reserve hinted at more aggressive rate hikes to control inflation, the Indian rupee dropped to a historic low against the US dollar today. The rupee sank further to 80.58 against the dollar after starting the day at a record low of 80.2850, down from 79.9750 the previous session. The US economy is under stress from the Federal Reserve’s efforts to fight inflation, it was announced overnight. This is the third consecutive big rate hike.
We are still a long way from the rate hike cycle’s conclusion, as seen by recent US Federal Reserve action and speech. Despite an improvement in domestic economic forecasts, we believe that the rupee will continue to be under pressure. As the liquidity in the banking system has swung into deficit mode after being in a surplus mode for almost 40 months, it will be difficult for the RBI to intervene and take strict actions to stop the rupee depreciation, and at this point, the RBI doesn’t want to stall the economic recovery, according to Santosh Meena, Head of Research, Swastika Investmart.