Indian rupee strengthens after Fed rate cut

The Indian rupee reached its highest level in over six weeks on Thursday, following the Fed’s decision to cut interest rates by 50 basis points. However, traders anticipate that importer demand for dollars will limit the currency’s immediate gains.

The rupee appreciated by 0.1 per cent to 83.66 against the US dollar, surpassing its previous session’s close of 83.75. The local currency reached a peak of 83.6650 during early trade, marking its highest level since August 1.

While the dollar index initially declined after the Fed’s rate cut announcement, it rebounded, supported by Chair Jerome Powell’s comments that a US recession is unlikely.

The rupee’s appreciation was driven by broad-based dollar selling interest, but traders expect resistance at the 83.65 level due to increased importer demand for dollars.

Asian currencies exhibited mixed reactions to the Fed’s rate cut, with the offshore Chinese yuan gaining and currencies like the Malaysian ringgit and Korean won declining.

The US central bank’s updated projections indicate further interest rate cuts in the coming years, with the benchmark rate expected to fall by a total of 1.5 percentage points by the end of 2026.

Attribution: Reuters

Subediting: M. S. Salama