The Indian rupee depreciated 28 paise to close at 88.13 against the US dollar on Thursday. The decline was driven by hawkish Federal Reserve commentary and a stronger US dollar. The Fed cut interest rates by 25 basis points as expected and indicated two more 25 bps cuts in 2025 and one in 2026. Fed Chair Jerome Powell raised concerns about the labor market and GDP growth while not seeing elevated financial risks from tariffs.

Rupee's Performance

The rupee faced additional pressure from:

• Worries over US tariffs on India
• Global trade uncertainties
• Sustained foreign fund outflows

Foreign Institutional Investors (FIIs) sold equities worth ₹1,124.54 crore on Wednesday.

Market Movements

Oil Markets

Brent crude traded 0.43% lower at $67.66 per barrel.

Export Projections

Union Commerce Minister Piyush Goyal expressed confidence that India's exports would grow around 6% this year, with free trade agreement discussions advancing with several countries.

Conclusion

The currency market remains sensitive to both domestic economic indicators and global monetary policy shifts. Traders and businesses are advised to monitor these developments closely as they navigate the volatile forex landscape.

The Indian rupee demonstrated significant strength in early trading, opening at 87.84 against the US dollar and subsequently touching 87.81, marking a gain of 28 paise from its previous close of 88.09. This surge propelled the rupee to its highest level since August 29, buoyed by a combination of factors including a weakening dollar and declining US Treasury yields.

Dollar Index Hits Three-Month Low

The dollar index, a key indicator of the greenback's strength against a basket of major currencies, slipped to a three-month low before recovering slightly to 96.73. This weakness in the dollar has provided substantial support to emerging market currencies, including the Indian rupee.

Oil Prices Offer Additional Support

Adding to the rupee's positive momentum, Brent crude futures saw a modest decline of 0.20%, settling at $68.33 per barrel. Lower oil prices typically benefit the rupee, as India is a major oil importer, and reduced crude costs can lead to lower import bills and improved trade balances.

Market Anticipation Builds for FOMC Meeting

Investors and currency traders are closely watching the upcoming Federal Open Market Committee (FOMC) meeting. Market consensus points towards a 25-basis-point rate cut, a move that could have significant implications for currency markets globally.

Rupee's Technical Outlook

Analysts are optimistic about the rupee's near-term prospects, identifying key levels to watch:

If the rupee breaks decisively below 87.90, it could potentially move towards 87.50 and even 87.20.

This technical outlook suggests room for further appreciation, contingent on the rupee's ability to breach key levels.

The combination of a weaker dollar, lower oil prices, and anticipation of the FOMC meeting has created a favorable environment for the Indian rupee. As global economic dynamics continue to evolve, market participants will be keenly observing how these factors play out and impact currency movements in the coming days.