- The value of the Indian rupee jumped against the US dollar and the yield on 10-year government bonds dropped.
- The yield on US Treasuries maturing in August dropped below 4%, but the US dollar index fell 0.34% to 102.52.
- The rupee’s increase was also bolstered by lower crude oil prices, with Brent oil currently trading for less than $75 per barrel.
Following a dovish US Federal Reserve decision that raised expectations of more interest rate cuts next year, the value of the Indian rupee jumped against the US dollar and the yield on 10-year government bonds dropped.
The 10-year G-Sec yield for 2033 opened at 7.21%, while the rupee gained 13 paise to the dollar at 83.27. The yield on US Treasuries maturing in August dropped below 4%, but the US dollar index fell 0.34% to 102.52.
Rupee
In addition to predicting lower borrowing costs in 2024, the US Federal Reserve indicated that the cycle of interest rate hikes has ended. The cycle of interest rate hikes appears to have ended as the Federal Open Market Committee (FOMC) maintained the benchmark lending rate at its current level for the third consecutive meeting.
By lowering their median estimate for interest rates at the end of 2024 to the middle of 4.50% and 4.75%, the FOMC indicated that they now anticipate interest rates to drop by 75 basis points from their current levels the following year.
Gains in the local currency were aided by a spike in the domestic equities markets and inflows of foreign institutional investors (FII). Significant capital inflows to India are anticipated in response to the decline in US Treasury yields.
The rupee’s increase was also bolstered by lower crude oil prices, with Brent oil currently trading for less than $75 per barrel. The Federal Reserve’s decision to keep interest rates at current levels and hints of possible easing in 2024 will affect the rupee’s anticipated rise against the declining dollar.
