Rupee drops 16 paise to near 1-week low as Fed rate hike fears loom

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MUMBAI: The rupee on Wednesday slid further by 16 paise to close at near one-week low of 67.65 against the US currency on sustained dollar demand ahead of the key US Federal Reserve’s decision on rate hike.

The domestic currency opened weak at 67.62 per dollar and oscillated between 67.55 and 67.71 during the day amid suspected dollar selling by the central bank.

The rupee had dropped by 7 paise to 67.49 per dollar yesterday.

Robust demand for the US currency from private sector lenders, probably at the behest of their corporate clients largely kept the home unit under immense pressure, a forex dealer said.

Foreign portfolio investors (FPIs) sold shares worth Rs 1,238 crore on net basis in past two sessions, provisional data showed.

Investors were cautious ahead of the US Federal Reserve’s June monetary policy decision due late today as the FOMC meeting was widely expected to increase rates for the second time this year. Robust US economic news-flows along with inflation reading, the highest in six years, bolstered the rate hike fears.

Investors were awaiting the announcement to look for cues if the Fed looks to tighten policy four times in 2018 or three times, as it indicated earlier this year.

The greenback traded broadly higher against its major counterparts in Asia Pacific trade. The dollar edged up against the euro and hit a three-week high versus the yen today. The dollar index was down at 93.70 after initial gains of up to 0.12 per cent.

On the energy front, crude prices dropped, hit by rising supplies in the US and expectations that producer group OPEC could relax voluntary output cuts. Saudi Arabia said it has raised its production above 10m barrels a day.

Brent crude futures, an international benchmark, was trading down at USD 75.64 a barrel, in early Asian trade.

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