Rupee slips to 88.13 as hawkish Fed cut ends four-day winning streak

The rupee fell to 88.13 per dollar after the US Fed's hawkish 25 bps cut, ending a four-day rally, as bond yields rose on selling by dealers and supply-demand mismatch

After appreciating against the dollar for four sessions, the rupee depreciated beyond 88 per dollar on Thursday, tracking its Asian peers, after a 25 basis point rate cut by the US Federal Reserve. While the dot plot suggests two rate cuts, Fed Chair Jerome Powell’s remarks were considered hawkish.

 

The currency settled at 88.13 per dollar, against the previous close of 87.81 per dollar, down 0.36 per cent.

 

“Despite a weaker dollar against other majors, the rupee's trend remains soft, with its depreciation currently serving as a growth stabiliser rather than a deterrent to rate easing,” said Dilip Parmar, senior research analyst, HDFC Securities. 

 

The Indian unit is one of the worst performing Asian currencies in 2025, and has weakened 2.86 per cent against the dollar.

 

The government bond market also witnessed notable selling pressure as participants who had positioned themselves for a dovish commentary from the US Federal Reserve were caught off guard by a more hawkish tone. This shift in expectations prompted a wave of selling, particularly from primary dealers, private banks, and foreign banks, who actively trimmed their positions.

 

The yield on the benchmark 10-year government bond settled at 6.51 per cent, against previous close of 6.48 per cent.

 

“Selling was also being triggered as caution ahead of ₹30,000 crore weekly auction," said a dealer at a primary dealership.

 

Additionally, the market is facing a mismatch in demand and supply, with participants anticipating that the second half of the fiscal calendar will see a reduced issuance of long-term bonds and a higher allocation towards short-term papers. As a result, heightened activity is being observed in long-duration securities, said a dealer with a private bank.