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Rupee Outlook

• The US dollar fell 0.10% yesterday but pared losses amid upbeat job data and surge in US treasury yields. Yields rallied after FOMC meeting minutes showed officials feel rising inflation and a very tight labour market warrant raising interest rates sooner than expected and reducing overall asset holdings

• Rupee future maturing on January 27 appreciated by 0.29% on weak dollar, rise in risk appetite in the domestic markets and FII inflows

• The rupee is expected to depreciate on a strong dollar, risk aversion in the global markets and surge in crude oil prices. Market sentiments were hurt as investors fear that Fed may respond more aggressively to sticky inflation than previously expected. Additionally, market participants are worried that monetary tightening across major countries to address stubbornly high inflation may prompt foreign investors to pump out liquidity from emerging markets

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