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Rupee tumbles against dollar as Federal Reserve signals rate hikes by 2023

17 Jun 2021 Evaluate

Indian rupee ended substantially lower against the US dollar on Thursday as US' Federal Reserve officials held interest rates near zero but signaled they expect two increases by the end of 2023, pulling forward the date of liftoff as the economy recovers. Traders were also worried RBI’s article stating that bank deposits and currency holding with the public have been adversely impacted during the second COVID wave, indicating a heavy outgo towards pandemic-induced medical expenditure. Adding more pessimism, a private report stated that lockdowns imposed by the states in April and May to contain the second wave of the deadly COVID-19 pandemic has likely led to the economy contracting 12 per cent in the June quarter as against 23.9 per cent contraction in the same quarter in 2020. On the global front; dollar extended gains on Thursday after the U.S. Federal Reserve surprised markets by signalling it would raise interest rates and end emergency bond-buying sooner than expected.

Finally, the rupee ended 74.08, weaker by 76 paise from its previous close of 73.32 on Wednesday. The currency touched a high and low of 74.08 and 73.57 respectively.

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