The Indian rupee saw a slight dip on Wednesday as traders awaited the critical Federal Reserve policy announcement. The Reserve Bank of India (RBI) is expected to step in to manage the local currency’s outlook amidst ongoing pressures.
At 10:05 a.m. IST, the rupee was trading at 84.9225 against the U.S. dollar, slightly lower than the previous session’s close of 84.8950.
Record Low and Trade Concerns
On Tuesday, the rupee hit an all-time low of 84.93, weighed down by worries over India’s growing merchandise trade deficit and significant foreign investor outflows. Provisional data showed that foreign investors sold over $700 million worth of equities in the previous session.
RBI Interventions in Focus
A trader from a state-run bank commented, “The Reserve Bank of India is likely to intervene near the 84.93-84.94 levels, which should limit further declines during the day.”
The RBI has been actively intervening to stabilize the rupee, which has been under pressure due to slower economic growth and elevated demand for dollars in the non-deliverable forwards market.
Most Asian currencies also weakened on Wednesday, with the Indonesian rupiah leading losses, down by 0.3%. Meanwhile, the dollar index remained steady at 106.9.
Federal Reserve Rate Decision
The market is widely anticipating a 25-basis-point rate cut from the Federal Reserve later in the day. However, attention is on whether policymakers revise their future interest rate projections with a more hawkish stance.
In their September outlook, the Fed projected 100 basis points of rate cuts by 2025. However, MUFG Bank noted that uncertainties, including the potential for inflationary effects from tariff hikes by the incoming administration, might influence the pace of these cuts.
