Rupee Weakens To 80.47 Against US Dollar In New Low, Analysts Predict Further Fall. Know Why

The US Federal Reserve raised rates by 75 basis points amid fear of recession. It also hinted at further hikes and that rates would stay elevated until 2024

The rupee may witness a further weakening after hitting a record low to the dollar on Thursday as the US Federal Reserve indicated aggressive rate hikes to tame inflation, according to analysts.

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The rupee depreciated 51 paise to touch an all-time low of 80.47 against the US dollar in early trade on Thursday following the US Federal Reserve's interest rate hike. The rupee opened at 80.27 and touched a record low of 80.47 a dollar in initial deals, according to Reuters.

Predictions of rupee weakening ahead

The rupee may witness a further weakening after hitting a record low to the dollar on Thursday as the US Federal Reserve indicated aggressive rate hikes to tame inflation, according to some experts.

The Fed raised rates by 75 basis points amid fear of recession. It also hinted at further hikes and that rates would stay elevated until 2024. Asian currencies opened weaker, with the Chinese yuan falling below 7.10 to the dollar.

"After the hawkish Fed Reserve commentary, the rupee is (set to fall)," said Anil Bhansali, head of treasury at Finrex Treasury Advisors. "The intervention from the central bank will remain crucial and they are expected to be present through the day. However, they may allow a closing for the pair above 80 today."

Samir Lodha, managing director at QuantArt Market Solutions predicted more losses for the rupee if the RBI aims to step back citing several reasons. "Once RBI allows rupee to trade beyond 80 on a consistent basis, I expect rupee to head towards 82.0 in a couple of months on account of the trade deficit and due to global recession and money supply tightening," Lodha said.

“It is possible that "rupee will depreciate further with RBI intervention to control it whenever required," said Venkatakrishnan Srinivasan, founder and managing partner at Rockfor Fincap. However, experts stated that any RBI action if likely may be less aggressive this time.

"RBI may not be aggressive considering the hawkish side of Fed. On top of that substantial drop in net liquidity in the system may warrant to do so," , said Arnob Biswas, head FX at SMC Global Securities.

Dilip Parmar, research analyst at HDFC Securities, said that "even if the RBI steps in, it will be a temporary support and it cannot change the direction." Meanwhile, Kunal Sodhani, vice president, global trading center at Sinhan Bank, said "a lot of option sellers may trigger stop losses"

"Needless to say though, it remains quite important to see how RBI action continues from here," Sodhani said.