inr-bank-notes - INR
  • Indian Rupee (INR) falls after Putin’s speech
  • Will the RBI defend 80 in the case of the hawkish Fed?
  • US Dollar (USD) rises as Putin mobilizes forces
  • Fed is expected to hike rates by 75 bps

The US Dollar Indian Rupee (USD/INR) exchange rate is rising on Wednesday for a third straight session. The pair rose 007% yesterday, settling at 79.75, trading in a range between 79.57 to 79.83. At 10:00 UTC, USD/INR trades +0.21% at 79.91.

The Indian Rupee, along with other riskier currencies heading lower in risk-off trade. Domestic equities are falling, and oil prices are rising on worries over Putin’s next move and with the US Federal Reserve’s interest rate decision in focus.

The Fed decision is the big risk even this week and one that could influence the Rupee and other emerging market economies in the coming weeks. Also, in the case of a hawkish Fed, to what extent will the Reserve Bank of India be willing to defend the 80 level?

The US Dollar is rising across the board. The US Dollar Index, which measures the greenback versus a basket of major currencies, trades at +0.5% at the time of writing at 110.72, adding to strong gains in the previous session.

The USD is rising on safe-haven flows as Putin mobilizes reserve forces and ahead of the Federal Reserve interest rate decision later today.

President Vladimir Putin raised tensions over Ukraine, declaring the mobilization of the country’s 2 million military reserves and confirming plans to annex parts of Ukraine that are under Russian occupation. Putin also threatened the West with a nuclear response if necessary.

Attention will now turn to the Federal Reserve interest rate decision. The US central bank is widely expected to raise interest rates by 75 basis points, although there is a small chance that the central bank could hike rates by 100 basis points after US inflation came in hotter than expected in August.

Should the Fed indicate that there are more large rate hikes to come, the US dollar could rise higher.