Rupee Edges Up 4 Paise to 95.03 Against US Dollar Ahead of US Fed Policy Decision
The Indian rupee traded within a tight band on Wednesday morning, edging up by 4 paise to touch 95.03 against the US dollar in early interbank foreign exchange deals. The marginal uptick came as market participants refrained from placing aggressive bets ahead of the crucial monetary policy statement from the US Federal Reserve.
On Tuesday, the local currency had settled at 95.07 against the greenback. While the currency managed a modest technical rebound at the open, macroeconomic headwinds continue to limit any meaningful appreciation.
Headwinds from Crude Oil and Stronger Dollar
Forex dealers noted that currency sentiment remains guarded due to elevated international energy prices and broader strength in the greenback. Global crude benchmark Brent was hovering near $115 per barrel, sustaining import bill concerns for India, the world’s third-largest oil-importing economy. Meanwhile, the US Dollar Index, which gauges the dollar's performance against a basket of six major global currencies, hovered at 102.37, up 0.06%.
Weakness across Asian peers and consistent foreign exchange outflows have also added downward momentum to the rupee over recent sessions.
Analyst Outlook and Central Bank Watch
According to Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan, the domestic unit is likely to remain under pressure in the near term.
"We expect the rupee to trade with a slight negative bias on positive dollar and weak Asian currencies. Crude oil prices remain elevated which may also keep rupee under pressure," Choudhary noted. He added that the spot USD/INR pair is anticipated to trade in a range of 94.85 to 95.40.
Key Factors Driving the USD/INR Pair:
- US Federal Reserve Announcement: While the Federal Open Market Committee (FOMC) is widely expected to keep benchmark interest rates unchanged, currency traders are closely awaiting the accompanying press conference by Fed leadership for directional cues on the path of global borrowing costs.
- Elevated Energy Costs: Brent crude sustained near $115 per barrel elevates trade deficits and widens the dollar demand from domestic oil marketing companies.
- RBI Intervention: Currency desks expect the Reserve Bank of India (RBI) to intervene periodically via state-run banks in the spot and non-deliverable forward markets to curb outsized volatility and protect the rupee at lower levels.
For Indian equity and debt investors, prolonged weakness in the currency combined with triple-digit crude prices threatens corporate margins, keeping imported inflation elevated and reducing the central bank's room for monetary easing. Market participants will focus on whether the 94.85 support level holds if foreign outflows persist.
