Rupee makes big gains despite US Fed hike

New Delhi, July 28

After breaching the Rs 80 to a dollar mark a week back, the rupee made its biggest intraday gain on Thursday to close at Rs. 79.65 against the US dollar on Thursday. It appreciated by 26 paise as against a decline of 13 paise on Wednesday when it had closed to close at 79.91.

The rupee as well as equities seems to have largely factored in the US Fed’s 75 bps hike in interest rates. “The tone of the Fed Chairman was less hawkish compared to previous statements which uplifted the sentiments. Going ahead, the rate hikes would be determined by the behaviour of inflation,’’ said analyst Motilal Oswal.

All eyes are now on the RBI’s monetary policy meeting next week where the factoring in of US Fed’s rate hike could have a “positive rub’’. The RBI might slow down its aggression and hike rates by 25 bps in its next MPC, said the analyst.

A report, released before evidence came in of the Indian markets absorbing the US Fed rate hike, expected the RBI’s MPC to vote unanimously for a 35 bps rate. “While inflation is likely to remain elevated in the near term, we think the MPC may acknowledge that price pressures have peaked, and note the favourable tailwinds by reducing its inflation forecasts, albeit marginally,’’ said Barclays’ economists in a note.