The rupee took a sharp plunge of 40 paise against the US dollar to end at 67.83 as the US currency gained strength after FED rate hike announcement.
Nervousness prevailed in the forex market following US Federal Reserve’s overnight decision to raise interest rates for only the second time since the financial crisis even as hawkish outlook signalled more rate-hikes in 2017.
After months of lingering confusion, the US central bank hiked rates by 25 bps to 50-75 bps. World financials and currency markets too reacted vehemently to the landmark outcome, ending months of lingering confusion and uncertainty.
The dollar strengthened across the board after the Fed upgraded its rate hike outlook amid expectations of economic projection surprises which may fuel further steep tightening path.
Forex dealers said increased demand for the greenback from importers against the backdrop of sustained capital outflows predominantly kept rupee under immense pressure.
The domestic unit resumed sharply lower at 67.76 from Wednesday’s closing value of 67.43 at the Interbank Foreign Exchange (forex) market against the backdrop of overnight developments.
It accelerated downward pressure after a brief period of consolidation, sinking to hit a low of 67.87 before ending at 67.83, showing a steep loss of 40 paise, or 0.59 per cent. This is the rupee’s biggest single day fall since November 15.
The US dollar index was quoted sharply higher at 103 in late afternoon trade.
Meanwhile, the RBI on Thursday fixed the reference rate for the dollar at 67.7994 and euro at 71.1555.