USA Crisis : Indian rupee may struggle on rising likelihood of Fed rate hike
The Indian rupee may come under pressure on Monday, after a tentative deal to raise the U.S. debt ceiling made it likely that the U.S. Federal Reserve will raise rates next month.
Non-deliverable forwards indicate the rupee will slightly lower from the previous session’s level of 82.575 per U.S. dollar.
Odds of a 25 basis points Fed rate hike at the June 13-14 meeting climbed to 2-in-3 after President Joe Biden on Sunday finalised a budget agreement with House Speaker Kevin McCarthy to suspend the existing debt ceiling until Jan. 1, 2025, and said the deal was ready to move to Congress for a vote.
Asian currencies were mostly lower while equities rose. U.S. equity futures extended Friday’s rally.
Rupee on Friday managed a recovery on back of position adjustments and inability of USD/INR to move convincingly above 82.80, traders said. Portfolio inflows on the equity side have been robust, helping the rupee.
The rupee has a bit of momentum heading into the week, but with Fed rate cuts this year priced out and a hike now likely next week, downside for USD/INR looks limited from here, a trader said.
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