 "Rupee hits 3-wk high amid trade optimism; ends at 87.80/$ ahead of Fed meet")
The Indian Rupee climbed to a three-week high on Wednesday, buoyed by optimism over India-US trade relations and ahead of the US Federal Reserve’s rate decision.
The domestic currency closed 26 paise higher at 87.80 against the greenback on Wednesday, the lowest level since August 28, according to Bloomberg. So far this financial year, the rupee has depreciated 2.67 per cent against the dollar, while in the calendar year to date, it has weakened 2.5 per cent.
The rupee had hit a record low of 88.44 against the dollar last week, pressured by strong dollar demand from importers amid concerns over potential US tariffs.
The positive sentiment for currency and equity markets came after a phone call between the Indian Prime Minister and the US President aimed at easing trade tensions.
Trump said he had a "wonderful" call with Modi and wished him a happy birthday, in a social media post on Tuesday. Meanwhile, Chief negotiators from India and the US continue negotiations in New Delhi for discussions on the proposed bilateral trade agreement (BTA).
The market participants seem to have unwound long side dollar-rupee position, considering broader dollar weakness against the majors and also awaiting some positive feeds on the India-US tariff trade policy front, Kunal Sodhani, head of treasury at Shinhan Bank, said.
The US Fed is also anticipated to cut Fed rates by 25bps, but if the trajectory in 2025 remains for a further 50 bps because of weakness in the labour market data, then it can contribute to further USD weakness, he said. "For USDINR, 87.69 acts as first immediate support, followed by 87.53, which acts as an important support, while 88.35 broadly continues to act as a resistance."
The dollar index has been hovering near two-month lows amid increased expectations of a Fed rate cut. The dollar may fall further if the FOMC outcome is more dovish than expected, analysts said. The measure of the greenback against a basket of six major currencies was up 0.10 per cent at 96.72. The US rate-setting panel will announce its policy decision after Indian market hours on Wednesday.
In commodities, crude oil prices edged lower amid heightened supply concerns of supply from Russia and the Middle East. Brent crude price was down 0.64 per cent at 68.03 per barrel, while WTI crude prices were lower by 0.62 per cent at 64.12 per barrel, as of 3:30 PM IST.