Indian Rupee Is Expected To Remain Under Pressure Due To New U.S Interest Rates

The Indian rupee is expected to remain under pressure against the US dollar in the coming months after the US Federal Reserve hiked interest rates  again to cool sweltering inflation. 

The US Federal Reserve raised interest rates by 0.75 percentage points on Wednesday, the sixth hike this year. A widening interest rate gap between India and the US  is trading  around 82.00.8 against the dollar.

A weak rupee is one of the factors  exacerbating India's high inflation. The Reserve Bank of India (RBI)  called a special meeting on Thursday to discuss breaching its inflation target, prompting the central bank to write a letter to the government. 

However, observers believe that the Indian currency will not recover  soon and may weaken further, having hit last month from the all-time low of 83 rupees per US dollar.

"I don't expect  the rupee to strengthen from here," said Sandeep Bagla, CEO of Trust Mutual Fund. "I think the rupee has a good chance of depreciating from 83 to  85 per dollar." Because we just don't have the currents.

And the RBI has spent around $100 billion  to defend the rupee without much success. The rupee has fallen more than 10% against the US dollar this year, a fall that has meant the Indian rupee is likely to weaken after the US Federal Reserve made another significant rate hike. 

A widening interest rate differential between India and the US, while the Fed is aggressively raising rates, was the main reason the Indian rupee plummeted to record lows. The Indian central bank will tap into its dollar reserves to try to prop up the currency. 

However, there is a limit to how long you can do this, the observers said. "The rupee has not fallen at the rate that other emerging market currencies or even developed market currencies are falling," Bagla said. "So I think there are about  updates there that could happen in the next three months.

This poses a challenge when it comes to inflation, which hit a five month high in India in September. The cost of imported goods such as crude oil increases with a weakening currency, affecting India's current account balance. Deficit. 

The RBI holds a special meeting on Thursday after failing to keep inflation within the 2-6 percent target range for three consecutive quarters. Inflation has been over 6 percent since January.

The central bank needs to explain its failure to the government and explain how it intends to control inflation. Indian stocks were subdued on Thursday. private and institutional investors.