Indian rupee slips as dollar gets Fed hike expectations tailwind

According to Business Recorder, the Indian rupee finished slightly weaker on Wednesday, moving in step with other Asian currencies as hopes grew for more US Federal Reserve rate increases. The rupee closed at 95.74 per dollar, down 0.1% from 95.59 in the previous session. Regional peers lost between 0.1% and 0.3%, while traders kept an eye on oil and Fed policy signals.

The dollar index has climbed over 1% since the Fed's rate increase last week, as wagers on further tightening strengthened. Markets for interest rate futures now reflect around 75 basis points of additional hikes over the next 12 months. ANZ analysts said that if the Reserve Bank of India does not respond, India's policy stance would drift further from tightening global conditions, and with rate gaps already narrowed, the rupee would face greater vulnerability to any worldwide risk-off move.

State-run banks sold dollars on Wednesday, most likely for the Reserve Bank of India, which helped cushion the rupee's decline, traders said. The central bank also reportedly used dollar-rupee sell/buy swaps to drain surplus liquidity, mostly in the January 2027 maturity and partly in October 2027, a Mumbai trader said. Oil stayed under $100 a barrel, supported by steadier Gulf crude supply and growing hopes for diplomacy in the US-Israeli war with Iran.