Rupee Hits Over Two-Week High Against Dollar Before Fed Rate Decision
The dollar index fell 0.8% to 96.56, the lowest level since July 1.
The Indian rupee rose to the highest level against the greenback in over two weeks on Wednesday before the US Federal Reserve policy meet outcome. The Indian unit settled above the psychologically crucial mark of 87 for the first time since Aug. 28.
The rupee strengthened 23 paise to 87.82 against the US dollar. It closed at 88.05 on Tuesday, according to Bloomberg data.
The move was underpinned by a softer dollar ahead of the Federal Reserve's policy decision, where markets are largely positioned for a rate cut, and by improving sentiment from constructive US–India trade discussions. The moderation in US treasury yields and the decline in the dollar index created a supportive backdrop for emerging market currencies, with the rupee particularly well-placed to benefit given the forward-looking nature of the recent trade dialogue, said Abhishek Goenka, founder and CEO, IFA Global.
The dollar index fell 0.8% to 96.56, the lowest level since July 1. It continued to move near the over two-month low throughout the session as most traders bet for a 25-basis points rate cut in the ongoing Federal Open Market Committee meeting.
According to FedWatch Tool, fed fund future traders are pricing in 96% probability of a rate cut. The current federal fund target rate is at 4.25–4.50%.
On the external front, the thawing tension between the US and India also supported the domestic currency. The US and India began trade negotiation on Monday. Additionally, US President Donald Trump called Prime Minister Narendra Modi to convey birthday wishes. This marks a significant development, given weeks ago Trump and US officials were passing harsh remarks on trade negotiation with India.
The dollar index was trading at 0.14% higher at 96.77 as of 3:41 p.m.
Moreover, oil prices snapped a three-day rally on Wednesday while traders assess the Ukrainian attack on Russian energy infrastructure.
The Brent crude's November future contract was trading 0.67% down at $68.02 a barrel as of 3:41 p.m. The prices rose as much as 1.85% to $68.69 a barrel in the previous session.
