Ending of rate hikes in US to stem sharp rupee depreciation

With front-loaded rate hikes by the US Fed, the US dollar will remain relatively strong in the immediate term

With the US dollar gaining strength over the last several weeks, several currencies had weakened sharply. The rupee was no exception, although forex sales by the central bank, a host of measures to support the currency, and a period of relatively benign crude oil prices had contained the extent of its weakness. However, with crude oil rebounding to $105/barrel, the rupee slipped to a fresh intra-day low, and crossed the threshold of 80/$ on July 19, 2022.

In June 2022, India’s merchandise trade deficit widened to an all-time high $26 billion, and the WPI and CPI inflation printed at 15.2