Rupee Closes Near 96 Ahead of Fed Decision
Rupee Closes Near 96 Ahead of Fed Decision
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Key Points
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Despite the rupee’s weakness, India’s foreign-exchange reserves had reached a record level, which traders said was not enough to offset importer demand and expectations of a U.S. Federal Reserve hike. Anil Bhansali of Finrex Treasury Advisors said the rupee could remain below 96 unless oil rose above $110 a barrel and the dollar index crossed 100.
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The rupee had fallen about 1.5% over the preceding seven sessions and was hovering near a seven-week low. The CME FedWatch tool put the probability of a 25-basis-point Fed rate increase at nearly 90%.
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Finrex analysts identified Rs 95.95-Rs 96.00 as a critical near-term zone and said market participants would closely watch the RBI’s response around that level. The 10-year U.S. Treasury yield had also risen above the 5% threshold.
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The rupee’s weakness was part of a broader decline across Asian currencies: the South Korean won fell 0.53%, while the Japanese yen and Indonesian rupiah each declined 0.14%; the Philippine peso and Malaysian ringgit were among the few currencies to gain.
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Exporters were expected to hedge one- to two-month forward exposures, while importers were likely to continue buying dollars on dips. Separately, traders warned that surging crude prices could worsen inflation and India’s external trade balance, with fears of disruption to oil flows through the Strait of Hormuz adding to pressure.
The Indian rupee closed near 95.95 per U.S. dollar on September 16, holding firm against the 96 threshold after seven straight sessions of weakness News18. The currency faced relentless pressure from strong dollar demand, foreign fund outflows, and rising U.S. Treasury yields as markets braced for a Federal Reserve rate decision expected to trigger further losses Nagaland Post.
Reserve Bank of India dollar sales kept the rupee from breaking decisively past 96, but analysts warned the currency remains vulnerable Rediff. Oil prices and Middle East tensions added to the strain, while traders bet on a 90% probability of a U.S. rate hike to push the dollar-rupee pair higher Money Control.
RBI's Defense Line Holds at Critical 96 Mark
The rupee breached the 96 level intraday but failed to sustain losses, settling instead at 95.94-95.95 News18. Reserve Bank intervention prevented a sharper decline as oil importers and other companies aggressively bought dollars Rediff. Finrex Treasury Advisors identified 95.95-96.00 as a critical zone where the RBI and market forces would clash News18.
Fed Rate Hike Looms as Dollar Strength Accelerates
The CME FedWatch tool put the probability of a 25-basis-point U.S. rate increase at nearly 90%, making a hawkish Fed decision almost certain Nagaland Post. The 10-year U.S. Treasury yield had already climbed above 5%, fueling dollar demand and weighing on Asian currencies broadly News18.
Anil Bhansali of Finrex Treasury Advisors said the rupee could stay below 96 unless crude oil jumped above $110 a barrel and the dollar index crossed 100 Nagaland Post. Exporters were expected to hedge forward exposures, while importers would keep buying dollars on any dips News18.
Crude Oil and Middle East Fears Compound Rupee Losses
Surging crude prices—driven by Middle East tensions and fears of Strait of Hormuz disruptions—hurt the rupee and threatened to worsen India's inflation and trade balance Nagaland Post. Oil importers' heavy dollar demand amplified the downward pressure on the currency Rediff.
Asian Currencies Retreat as Dollar Dominates
The rupee's weakness mirrored a broader retreat across Asia. The South Korean won fell 0.53%, while the Japanese yen and Indonesian rupiah each dropped 0.14% News18. Only the Philippine peso and Malaysian ringgit managed to gain ground. Despite India's record-high foreign-exchange reserves, traders said the buildup was insufficient to offset importer demand and Fed expectations Nagaland Post.
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