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Al Ansari money exchange, Dubai. Image Credit: Photo Virendra Saklani/Gulf News

The Indian rupee is likely to fall further after hitting a record low to the dollar on Thursday as the US Federal Reserve hinted at more aggressive rate hikes to tame inflation.

Against the UAE dirham, the value of the Indian rupee hovered at an all-time level of 22 on Friday, with forex analysts evaluating how the currency is expected to get weaker in the coming days. Check the latest forex rates here.

The rupee opened at a record low of 80.2850 per US dollar on Thursday, down from 79.9750 in the previous session. Weakness in the Indian currency's value against the US dollar will be automatically reflected in its exchange rate with the UAE dirham as the UAE currency is pegged to the dollar.

AED INR Forecast
The Indian rupee will drop further against the UAE dirham in the coming days, analysts evaluate why. Image Credit: The Economy Forecast Agency

More rate hikes to come, more pressure for rupee

The Fed raised rates by 75 basis points, in line with expectations. More importantly, it hinted that more hikes were coming and that rates would stay elevated until 2024. Asian currencies opened weaker, with the Chinese yuan slipping below 7.10 to the dollar.

"After the hawkish Fed Reserve commentary, the rupee is (set to fall)", said Anil Bhansali, head of treasury at India-based Finrex Treasury Advisors.

"The intervention from the central bank will remain crucial and they are expected to be present through the day. However, they may allow a closing for the pair above 80 today." Samir Lodha, managing director at QuantArt Market Solutions, reckoned that more losses were in store for the rupee if the RBI decides to step back.

STOCK India rupees
Once Reserve Bank of India (RBI) allows the Indian rupee to trade beyond 80 on a consistent basis, experts expect rupee to head towards 82.0 in a couple of months.

Rupee to hit 82 vs. US dollar in a couple of months?

"Once Reserve Bank of India (RBI) allows the Indian rupee to trade beyond 80 on a consistent basis, I expect rupee to head towards 82.0 in a couple of months on account of the trade deficit and due to global recession and money supply tightening," Lodha said.

It is possible that "rupee will depreciate further with RBI intervention to control it whenever required," said Venkatakrishnan Srinivasan, founder and managing partner at Rockfor Fincap.

However, any possible intervention by RBI may be less aggressive this time, said Arnob Biswas, head FX at India-based SMC Global Securities. "RBI may not be aggressive considering the hawkish side of Fed. On top of that substantial drop in net liquidity in the system may warrant to do so," Biswas said.

Dilip Parmar, research analyst at India-based HDFC Securities, said that "even if the RBI steps in, it will be a temporary support and it cannot change the direction." Meanwhile, Kunal Sodhani, vice president, global trading center at South Korea-based Sinhan Bank, said "a lot of option sellers may trigger stop losses" "Needless to say though, it remains quite important to see how RBI action continues from here," Sodhani said.