Indian rupee, which earlier this week touched an all-time low, is likely to remain under pressure and may test new levels as a fallout of the US Federal Reserve indicating more interest rate hikes, experts said.
The aggressive rate hikes will dampen demand and increase the possibility of a recession in the US. This could accelerate the pace of capital outflows, weaken the rupee and raise the threat of imported inflation.
The Fed rate hikes narrow the difference between the interest rates of India and the US, making India less attractive for dollar investment. This could lead to capital outflows, and coupled with elevated crude oil and commodity prices may depress the rupee further, experts said.
Also, there is a threat of imported inflation. Even if the global prices remain unchanged, a weaker rupee means India is paying more for its imports and thus higher inflation.
India is 85 per cent dependent on imports to meet its crude oil needs and 50 per cent for its gas requirement.
The rupee, which touched its all-time low of 80.15 against the US dollar in intra-day trade on Monday, rebouned by 39 paise on Tuesday to close at a nearly two-week high of 79.52 against the greenback.