Rupee Falls to 88.43 Against Dollar Amid Fed Rate Cut Uncertainty
The Indian rupee declined 21 paise to 88.43 against the US dollar in early trade on Thursday, pressured by dollar strength following Federal Reserve Chair Jerome Powell’s comments that a December rate cut is “not a foregone conclusion.”
Key Developments
- Rupee depreciates to 88.43 against USD, down 21 paise
- Dollar index strengthens to 99.06 despite Fed’s 25 bps rate cut
- Domestic equity markets decline with Sensex falling 298 points
- FIIs sold equities worth ₹2,540 crore on Wednesday
Market Reaction to Fed Policy
The US dollar index climbed to 99.05 while the 10-year Treasury yield reached 4.07% overnight, despite the Federal Reserve implementing a 25 basis point rate cut. The rupee opened at 88.37 before weakening to 88.43 against the greenback.
On Wednesday, the rupee had closed at 88.22 against the dollar.
“The U.S. dollar index rose from Wednesday to 99.02 after the Fed chair announced that another rate cut this year is ‘not a foregone conclusion’ as the dollar found support at lower levels even after the rate cut.”
Expert Analysis on Currency Movements
Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors LLP, noted that markets are assessing multiple factors affecting currency values.
“Markets are also weighing the effects of the ongoing U.S. shutdown and the mixed economic signals.”
Bhansali added optimism about potential rupee recovery, stating:
“We await the same, as on such a day the rupee will gain by 40-50 paise. Asian currencies were generally on the upside, and therefore, we expect the rupee to be bought against the dollar.”
Broader Market Impact
The dollar index, measuring the greenback against six major currencies, traded at 99.06. Meanwhile, Brent crude futures declined 0.25% to $64.75 per barrel.
Domestic equity markets mirrored the currency weakness, with the Sensex falling 297.96 points to 84,699.17 and Nifty dropping 90.05 points to 25,963.85.
Foreign institutional investors were net sellers, offloading equities worth ₹2,540.16 crore on Wednesday, according to exchange data.
