Rupee 4-day rally on hold after Fed cuts; opens weaker at 87.95/$

The Indian Rupee traded weak on Thursday as investors assessed the US Federal Reserve Chair's cautious labour market comments after slashing key interest rates by 25 basis points (bps). 

 

The domestic currency opened 14 paise lower at 87.95 against the greenback on Thursday, snapping its four-day winning streak, according to Bloomberg. So far this year, the rupee has depreciated 2.78 per cent, making it the worst performer among Asian peers.

 

The rupee was expected to open slightly lower from its Wednesday's closing as traders assess the Fed's outlook following the rate cut, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. "Expect a range-bound movement in the pair today after the passing over of a major event, while we await the outcome of the US-India trade tariffs meeting."

 

   

Jerome Powell cut interest rates by 25 basis points and pencilled in two more reductions this year. Powell said that the labour market is showing growing signs of weakness, stating that revised job numbers mean it is no longer "very solid." 

 

"Uncertainty about the economic outlook remains elevated... The Committee is attentive to the risks to both sides of its dual mandate (unemployment and inflation management) and judges that downside risks to employment have risen," the Fed statement read. Going ahead, the Fed dot plot indicated two more rate cuts in the rest of 2025, one cut each in 2026 and 2027, and no cuts in 2028. 

 

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. "For USDINR, 87.69 continues to remain as immediate support, followed by 87.53, while 88.20 acts as first resistance, followed by 88.36 levels," Kunal Sodhani, head of treasury at Shinhan Bank, said. 

 

The dollar tumbled to a 43-month low, touching 96.21 levels, last seen in Feb 2022, after the Fed's rate cuts. The measure of the greenback against a basket of six major currencies was up 0.15 per cent at 97.01.

 

Going ahead, the Bank of Japan will kick-start its two-day policy meeting, the UK will announce its interest rate decision, and the US will release its weekly jobless claims report later today. 

 

In commodities, crude oil prices were trading slightly lower as rate cuts were fully anticipated and factored in by the traders. Brent crude price was down 0.13 per cent at 67.86 per barrel, while WTI crude prices were lower by 0.20 per cent at 63.92 per barrel, as of 9:12 AM IST.