The Indian rupee closed lower on Thursday’s session at Rs 88.13 per US dollar, down by 31 paise. The fall came after global markets reacted to signals from the US Federal Reserve’s recent announcement of a cut in interest rates that left investors uncertain about its future stance.
Earlier this week, the US Federal Reserve cut its policy rate by 25 basis points (bps). However, even though the rate cut was expected, Fed Chair Jerome Powell’s comments conveyed that there could still be other rate cuts, but not anytime soon. This hint could have created buying interest in the US dollar across global markets, thereby pressurising most Asian currencies, including the Indian rupee.
Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.02 per cent to 96.89.
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Analysts said demand for the dollar from importers and oil companies also weighed on the rupee. Traders noted that the rupee’s weakness was not an isolated case. Other Asian currencies also slipped as the dollar gained strength on higher US bond yields and safe-haven demand.
Rupee’s three-day consecutive rally:
Earlier this week, the Indian rupee rose to its highest level in nearly three weeks on Wednesday, as trade talks with the US cheered traders. The currency fell as much as 0.4 per cent to 87.72, the lowest since August 29. The currency reached a 3-week high against the US dollar, recovering for the third consecutive day. It has gained 75 paise from its record low of 84.49 per dollar, hit on September 11.
US Fed policy reform:
On Wednesday, the Fed announced its first rate cut since December, lowering the benchmark federal funds rate by 25 basis points (bps). This move was aimed to support economic growth amid easing inflation and signs of softness in the labour market. The Fed officials have signalled that two more rate cuts are possible before the end of 2025, indicating a dovish stance in the face of economic uncertainty.
