The Indian rupee experienced a decline on Wednesday, following a day of fluctuations in the market. This change was influenced by various factors, including portfolio flows and caution before the Federal Reserve's policy decision.
The rupee ended the day at 89.9650 against the US dollar, which is slightly weaker than the previous day's close of 89.8750. Throughout the day, the currency moved between 89.77 and 90.08, after recovering from last week's record low of 90.42.
Early gains, likely due to equity fundraising, were offset by increased demand for the US dollar in the afternoon. This led to a decline in the value of the rupee.
Other Asian currencies also saw modest changes, while the dollar index slipped to 99 ahead of the Federal Reserve's decision. India's benchmark indexes, the BSE Sensex and Nifty 50, fell by 0.3% each, mirroring declines in regional markets.
The Federal Reserve is expected to cut interest rates by 0.25%, and investors will be watching for comments from policymakers and rate projections. Despite concerns about persistent inflation and a resilient US economy, money markets are predicting two more rate cuts in the next year.
As the market waits for the Federal Reserve's decision, the dollar-rupee far forward premiums have been affected, with the 1-year implied yield down 4 basis points at 2.54%. The way Fed Chair Powell communicates the decision will be crucial for the dollar and the overall market reaction.
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