Rupee is trading at new lows early morning in the context of strengthening dollar. Besides the news of sooner than expected interest rate hike in the US has also put pressure on rupee. What triggers a potential interest rate stance by the Fed is the rising US inflation.
Early morning session on Thursday, the rupee registered 68.74 a dollar, down 0.23% from its previous close of 68.57. It is on the brink of the all-time low of 68.85 to the dollar.
The Fed has already indicated its desire to move towards raising its policy rate called the Fed rate. This event is expected soon so as to match the rising inflation rate. At present, the US bond market is witnessing heavy selling in the context of this anticipated interest rate hike.
There is always inverse relationship between bond prices and interest rate in the economy. When the Fed increases rate of interest to new highs compared to the last eight years, bonds may look unattractive. Anticipating this situation, the US bond market is undergoing heavy sell off by bond holders.
Already, bond market is on downturn expecting the injection of nearly $1tn economic stimulus package of tax cuts and infrastructure investments suggested by the new President.
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