The dollar was weakened sharply against the dollar on Thursday, as officials said the US central bank was on track to continue with steep rate increases, prompting the dollar to gain global.
The previous close of 79.16 per dollar was on Tuesday, and the previous close was 79.45 per dollar 10.10 am in India.
A 50 basis point rate hike would be a reasonable thing to do in September, said Mary Daly, San Francisco Fed President, in an interview to Reuters on Wednesday. If we see inflation roaring ahead undaunted, the labor market showing no signs of slowing, then we're in a different position where a 75 basis-point increase might be more appropriate. I go in with the 50 in mind as I look at the data coming in. The index, which measures the currency against six major rival currencies, was last at 106.41 as opposed to 106.09 at 3: 30 pm IST on Wednesday.
After the recent weak economic data in the US, speculation had grown up globally that the may adopt a slower pace of rate hikes to redress damage to The announced 75 basis-point rate hike in July, taking the total rate increase to 225 bps so far in 2022. There are more US interest rates that lead to outflows of overseas investment from emerging countries such as India.
Technical positioning in the market has exacerbated the weakness of the rupee on Thursday, according to traders. After the weakened over the past few days, traders squared off aggressive bets on the to and bolstered the domestic currency.
The rupee was moving in line with global fundamentals, with the rush to beat off bets on the US dollar now having abated, traders said.
The move on Thursday is linked to what happened last week and the early part of this week. Anindya Banerjee, vice president, Currency Derivatives Interest Rate Derivatives at Kotak Securities, said last week that the move was more of a shake out of the longs bets on the dollar and unhedged exports.
The dollar index has strengthened globally and has played catch up once that has been done. This was more of a technical pullback, the positioning was excessively long, that had to be flushed out, he said.
Banerjee predicted the rupee would be in a range of 79.10 -- 79.75 per US dollar over the near term.