In comparison to its previous close of 88.05., the rupee began the day on September 17 higher, climbing 23 paise to open at 87.82 versus the US dollar. Supported by the resumption of trade negotiations between the United States and India, currency analysts say this is the first time the rupee has opened below the 88 mark in two weeks.
As investors await the conclusion of the US Federal Reserve’s policy meeting, sentiment is still cautious despite the encouraging start. The rupee has been supported by a weaker dollar globally, but future actions will be mostly influenced by the Fed’s imminent rate announcement, which is anticipated late tonight in India.
A phone conversation between US President Donald Trump and Prime Minister Narendra Modi to reduce trade tensions fueled optimism in the currency market. Trump called the call “wonderful” and wished Modi a happy birthday in a social media post on Tuesday. In the meantime, the proposed bilateral trade agreement (BTA) was still being discussed in New Delhi by the chief negotiators of both nations.
However, Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP, noted that recent volatility was connected to both developments in India-US trade discussions and broader dollar weakness. As a result, the rupee traded somewhat worse. “As rupee strength is supported by global dollar softness, investors are closely monitoring the Federal Reserve’s policy meeting, and market sentiment is still cautious,” he said.
A weaker dollar and the RBI’s position would likely keep the rupee volatile in the immediate future, Bhansali continued, but medium-term risks still exist because of outside pressures and unclear policy. “While exporters might wait to sell, importers might try to buy on dips,” he suggested.
Amid growing anticipation of a rate decrease by the Federal Reserve, the dollar index was trading close to two-month lows. It was up 0.09 percent at 96.71 against a basket of six major currencies at the time of the last check. According to analysts, if the Fed adopts a more dovish stance, the dollar may depreciate even further. On Wednesday, after Indian market hours, the US rate-setting panel is expected to make its announcement.
Concerns over supply interruptions from Russia and the Middle East caused crude oil prices to modestly decline in the commodities market. As of 9:10 AM IST, WTI crude was down 0.17 percent at \$64.41 a barrel, while Brent crude fell 0.19 percent to \$68.34 a barrel.
