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Rupee weakens as traders price further Fed tightening

USD/INR moves near 95.75 as the dollar index hits about a seven week high, with FedWatch showing nearly a 90% chance of at least one more US rate hike this year.

Reported · Written up by our desk · Major Pairs

The Indian rupee edged lower against the US dollar on Wednesday, with USD/INR marginally higher to near 95.75 as the US dollar outperformed amid expectations that the Federal Reserve will keep its tightening cycle in place for the rest of the year, FXStreet reported.

FXStreet said the US Dollar Index, which tracks the greenback versus six major currencies, rose about 0.25% to around 100.80, the highest level in more than seven weeks. CME FedWatch data cited by FXStreet showed traders assign an almost 90% probability that the Fed will deliver at least one more interest rate hike this year.

FXStreet attributed the shift to hawkish messaging from regional Fed presidents who are not voting members this year. It highlighted Chicago Fed President Austan Goolsbee warning that supply shocks are arriving more frequently and lasting longer, and Richmond Fed President Thomas Barkin saying additional rate hikes may be needed to curb inflation.

FXStreet also pointed to pressure in oil prices, noting the MCX Crude Oil contract expiring October 19 was down 1.43% to around Rs. 8,520, its lowest level in two weeks, on hopes of US Iran diplomacy. The outlet said lower oil can support currencies like India’s because of the country’s reliance on oil imports.

Latest closeWTI crude $90.73 ▼4.1%|Dollar index 100.87 ▲0.4%

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