The domestic currency opened at 94.66 per dollar, compared with Wednesday’s (June 17’s) close of 94.53, marking a decline of 13 paise.
The pressure on emerging-market currencies came after Fed policymakers struck a hawkish tone at their latest policy meeting. Nine of the 18 policymakers projected at least one interest rate hike in 2026, exceeding market expectations.
Analysts at Goldman Sachs had expected only a small number of Fed officials to signal further tightening.
Goldman Sachs also highlighted the Fed’s inflation projections, noting that the median estimate for core PCE inflation in 2027 stood at 2.5%, above the investment bank’s forecast of 2.3%. The brokerage said the latest projections increase the risk of future rate hikes, although its base case remains that the Fed will keep policy rates unchanged this year.
The Fed’s stance prompted investors to reprice rate expectations. The yield on the US two-year Treasury note jumped 12 basis points, equities weakened and the dollar strengthened against major peers.
Recent US economic data further reinforced expectations that the world’s largest economy remains resilient. Retail sales rose 0.9% month-on-month in May, beating forecasts of a 0.5% increase, while pending home sales climbed 3.8%, exceeding analyst estimates. The data followed a third consecutive month of strong job growth.
Market participants said the rupee’s movement was driven more by the shift in US interest rate expectations than by developments in oil markets.
“After a long time, it’s not about oil for the rupee,” a currency trader at a private sector bank said, adding that it remains difficult to gauge how much of the Fed-driven repricing will ultimately play out.
Meanwhile, crude oil prices continued to trend lower after reports that the United States and Iran reached an interim agreement aimed at halting hostilities, reopening the Strait of Hormuz and easing concerns over global energy supplies.
Lower oil prices typically support the rupee by reducing India’s import bill, but the impact was outweighed by renewed dollar strength following the Fed’s policy signals.
-With Reuters inputs
