Currency Check: Rupee opens 16 paise lower as hawkish Fed boosts rate hike bets

The Indian Rupee kicked off Thursday's trading session down 16 paise against the US Dollar, a direct fallout from a decidedly hawkish tilt by the US Federal Reserve, which has intensified market expectations for future rate hikes. This currency depreciation occurred despite the Fed holding its key interest rate steady at 3.5%-3.75% on Wednesday, a pause maintained since December 2025, but the tone from the first policy meeting chaired by newly appointed Fed leader Kevin Warsh signaled a renewed commitment to taming persistent inflation. Warsh's hawkish debut has sent ripples through global financial markets, bolstering the US Dollar and increasing the cost of capital for emerging market economies like India. Nine of eighteen FOMC officials now anticipate at least one more rate hike by the Fed before the year's end, a stark shift from earlier, more dovish expectations. This creates a significant headwind for the Rupee, as higher US yields attract capital away from Indian assets, putting further pressure on the local currency amidst a backdrop of persistent global inflation and ongoing geopolitical uncertainties like the lingering Middle East conflict. Looking ahead, market participants will be keenly watching upcoming US inflation data and the Federal Reserve's forward guidance from subsequent FOMC meetings for any fresh cues on the trajectory of US monetary policy. A sustained hawkish stance could lead to continued capital outflows from emerging markets, forcing central banks in countries like India to consider their own policy responses to stabilize their currencies and manage imported inflation. The global economy appears set for a period of heightened volatility as major central banks navigate the delicate balance between price stability and growth.