Rupee Risks Weakening, Tracking Robust Dollar Rise On Fed Rate Hike Concerns

Rupee Today: The rupee risks weakening further against the dollar on Monday.

Rupee Risks Weakening, Tracking Robust Dollar Rise On Fed Rate Hike Concerns

Rupee Today: Indian currency risks losses against the dollar

The rupee risks weakening against the dollar on Monday, as expectations that the Federal Reserve will keep tightening its policy boosted the US currency and Treasury yields, and triggered safe-haven bets resulting in a sell-off in risk assets.

After weakening against the American currency in the previous session, the rupee extended losses to 79.8638 from its previous close of 79.7825, according to Bloomberg.

While PTI reported that the rupee rose 4 paise to 79.80 against US dollar in early trade.

At the interbank foreign exchange, the domestic unit opened lower at 79.90 against the dollar but recovered lost ground to quote 79.80, registering a gain of 4 paise over its previous close, according to PTI.

The Indian currency is not far from its record low of 80.0650, which was set on July 19. The Reserve Bank of India (RBI), according to traders, likely intervened adamantly when the rupee fell to that level since it is thought to be a psychologically significant threshold at 80 to the dollar.

Prior to the Fed's important Jackson Hole symposium this week, another Federal Reserve official warned of the possibility of prolonged aggressive monetary tightening, sending the US dollar index to a new five-week high.

Reuters reported that there will be an "understandable hesitancy" to take the rupee below 80 at open as market participants assess "what will be the RBI's stance today", quoting a currency dealer with a Mumbai-based bank said.

"Will the RBI relent and let the rupee adjust more in the face of across-the-board dollar strength," the dealer said.

The dollar index edged up to 108.25, adding to the 2.3 per cent increase from the previous week, which was the gauge's best performance since April 2020. Both the 10-year and 2-year US Treasury yields increased to 3 per cent and 3.28 per cent, respectively.

Demand for the dollar has increased as a result of comments made by Fed officials indicating there would be no slowdown in tightening any time soon. The traders have revised their forecasts that the Fed will lower rates later in the year in light of the rather hawkish statements.