Fed effect: Rupee hits 1-month low against US dollar, Sensex down 1200 points

The benchmark Sensex of the Indian stock market was down over 1200 points in afternoon trade, while the partially convertible rupee was trading at 75.18 per dollar, its weakest since December 24.

India’s benchmark 10-year bond yield rose 5 basis points to 6.71% from its previous close and is its highest level since December 2019.

“The recent Fed meeting thus far came as no surprise to the market, but participants received more concrete confirmation that the Fed is in the middle of a rate hike in March and followed by a quantitative tightening (bond sales or balance sheet trading). ) in ensuing meetings. Bond markets fell and US yields rose sharply. US Dollar index tested one-month high above 96.50,” CR Forex Advisors said in a note.

Higher global oil prices have added to bearish pressure on the rupee, as India imports more than two-thirds of its oil needs, and rising fuel costs will fuel domestic inflation.

“Apart from a strong US dollar and FII selling in the domestic equity markets, crude oil prices are also creating a headwind. Rising geopolitical tensions between Russia-Ukraine and the United Arab Emirates and Yemen could further disrupt the demand-supply formula and drive up energy prices further. This will again widen the trade deficit for the net oil importing countries,” CR Forex Advisors said.

“In short, volatility in USD-INR is back with a bang. Overall, we are expecting USD-INR to have a short-term range of 74.30 to 75.70 with a Bullish bias.”

In January so far, foreign investors have dumped $2.2 billion worth of Indian shares after a net purchase of $3.76 billion in 2021. He had bought shares worth $23.29 billion in 2020 and $14.23 billion in 2019. (with agency input)