Indian rupee languishes at six-week low ahead of Fed outcome, RBI limits losses

Business Recorder reported that the Indian rupee slid to a level last seen in late July on Wednesday. Heavy dollar purchases by domestic firms and expectations of a Federal Reserve rate increase due later that day weighed on the currency. The unit finished unchanged at 95.9550 per dollar, having touched 95.9750 intraday, its weakest level since July 27.

Oil prices softened slightly yet stayed above $100 per barrel, with central bank intervention likely supporting the rupee, which has held above 96 in recent sessions. Regional currencies were broadly subdued as the dollar index hovered near multi-week highs. Attention will turn to the FOMC statement and the press briefing by Fed Chair Kevin Warsh, for clues on any tightening beyond this hike.

Interest rate futures priced a 92.5% probability of a 25 basis point increase at the Fed's decision later in the day, while swap markets imply about 60 bps of further hikes for the rest of the year. A trader at a foreign bank said a more hawkish outcome could add pressure on the rupee and push it beyond the 96 level. Goldman Sachs analysts, in a note, expect the Fed to make only minimal changes to its statement and to offer little guidance on future hikes.