The rupee gained, but traders cautioned of volatile currency moves on jitters ahead of the US Federal Reserve policy outcome later in the day.
The rupee rose roughly 0.4 percent early on Wednesday to trade at 76.32 per dollar, up from the previous close of 76.62, but dealers warned that the pull and push will keep the currency volatile on anxieties ahead of the US Federal Reserve’s policy decision later in the day.
On Wednesday, the US Federal Reserve is largely expected to raise interest rates by 25 basis points. Traders and investors, on the other hand, will be looking for clues from the central bank about its intended policy course. This year’s rises might be as much as seven, according to the markets.
“The rupee strengthened against the dollar as traders hailed the steady decline in global crude oil prices, as fears of rising domestic inflation and a widening trade deficit vanished. The rupee’s gains were limited ahead of the US Federal Reserve’s policy announcement today, which is likely to hike interest rates “CapitalVia Global Research’s Lead for International and Commodities, Kshitij Purohit, said.
“As the US Federal Reserve prepares to increase rates for the first time since the outbreak, many are seeking for signs about the pace of future rate hikes. Markets anticipate a 25-basis-point hike, according to the Chicago Mercantile Exchange’s Fed monitoring tool. Nonetheless, pricing has risen to reflect a 70% chance of a greater 50 basis point hike at the next meeting in May “Mr Purohit continued.
Moreover, the euro has been pulled down in recent days by persistent capital outflows, and the uncertainty surrounding the Ukraine crisis has driven crude oil prices to multi-decade highs above $140 a barrel.
According to stock exchange statistics, foreign institutional investors (FIIs) were net sellers in the capital market on Tuesday, offloading shares worth Rs 1,249.74 crore.
However, the energy-sensitive rupee has benefited from a solid start for local bourses and a drop in oil prices over the previous two days, when Brent fell below $100 a barrel for the first time this month.
According to Sriram Iyer, Senior Research Analyst at Reliance Securities, the Indian rupee opened stronger following the overnight sell-off in crude oil prices. Mr Iyer noted that Asian and developing market rivals were higher ahead of the US Fed meeting decision, which might boost confidence in home markets.
Rupee Gains, But To Be Volatile On Jitters Ahead Of Fed Policy Outcome