As a result of hotter-than-expected inflation data and the Federal Reserve’s sustained hawkish stance, the USD/INR pair surged higher on Thursday, attracting buyers as the U.S. dollar strengthened. The U.S. Consumer Price Index (CPI) report revealed persistent inflationary pressures, reinforcing expectations that the Fed will maintain its aggressive monetary policy in the coming months.
The Indian rupee, already struggling amid global economic instability and domestic inflation concerns, faced additional pressure due to the rising strength of the U.S. dollar. The demand for the greenback was further fueled by increasing yields on U.S. Treasury securities, making the dollar a preferred choice for investors.
The Fed’s policymakers have indicated that interest rates may remain elevated for an extended period to tame inflation, raising concerns in emerging markets like India. A stronger dollar often leads to capital outflows and additional strain on local currencies such as the rupee, adding to the anxiety in these markets.
While the USD/INR pair shows increasing momentum, analysts caution that its trajectory could shift based on upcoming U.S. economic data and any changes in the Fed’s tone. For now, the pair remains supported by high U.S. inflation. Traders are closely watching the Fed’s next moves and their impact on global currency markets.
The rupee could face further challenges as inflation concerns grow in both the U.S. and India, leaving the USD/INR exchange rate vulnerable to continued dollar strength.
