INR vs USD: Indian rupee weakens to above 96 against US dollar after Fed’s rate hike move; key things to know

Investing.com data showed that the Indian rupee weakened to a low of 96.173 against the US dollar during the morning market hours. As of 9:29 am (IST), the domestic currency was trading near flat levels of 96.127, in comparison to 96.131 against the greenback.

After touching the low, the Indian rupee witnessed a sharp intraday pullback to around 95.87 against the US dollar, indicating significant buying during the market hours.

During the morning hours, the Indian currency witnessed significant selling pressure on Thursday’s market due to higher demand for dollars among currency market investors, caused by the US Federal Reserve’s 25 basis point rate hike move, for the first time in over three years.

The US Fed’s rate hike move strengthened the US dollar, increasing yields on dollar-denominated assets, which has the potential to draw in foreign capital to the US markets.

Rupee’s performance

Data showed that the Indian rupee has weakened nearly 4% in the last six months, and 1.5% in the past three months.

The domestic currency, witnessing pressure, has lost 0.33% of its value in the last one month against the US dollar and is trading 0.51% weaker on a five-session basis.

Dollar index jumps above 100

The data collected from Investing.com showed that the US dollar spot index surged above 100, as investors focused on the 25 basis point rate hike, with another potential rate increase in focus for the current year.

US Dollar spot index was trading 0.04% lower at 100.28 as of 10.19 am (IST), in comparison to 100.32 at the previous currency market close, according to the exchange data.

Investors were also focused on the increased dollar demand amid the heightened uncertainty in the market, with no signs of a de-escalation in the West Asia conflict.

Along with the geopolitical pressure, the Fed’s rate outlook added further downward pressure to the Indian rupee which was already trading weaker due to the foreign investment outflows and the elevated oil prices.