Asian currencies are trading weaker ahead of the Federal Reserve's policy decision, leaving the Indian rupee set for a slightly softer open on Wednesday. Traders are watching whether the U.S. central bank signals that any pause in rate increases will be brief, while higher oil prices continue to cloud the rupee's outlook.
Highlights
- Rupee closed 0.1% higher at 95.1150 per dollar after recovering from 95.24, aided by likely Reserve Bank of India intervention.
- Brent crude climbed 1.6% to $115.74 a barrel after a Saudi refinery attack, intensifying pressure on the rupee despite a special RBI window for refiners.
- Market expects Fed to keep rates unchanged Wednesday but ING Bank anticipates a December hike and warns of possible three-member dissent.
Asian currency moves and rupee trading levels
As reported by Reuters, the rupee is expected to open in the 95.12-95.16 range after closing 0.1% higher at 95.1150 against the dollar on Tuesday. Dealers say the currency recovered after slipping to 95.24 intraday, helped by dollar sales from state-run banks that two traders say may be linked to Reserve Bank of India intervention.Market participants see 95.30 as an important near-term support level for the rupee. A trader at a private-sector bank says the currency's resilience despite rising crude prices points to a larger role for the RBI in containing pressure and keeping the exchange rate broadly range-bound near 95 per dollar.
Oil prices and Fed outlook weigh on sentiment
Brent crude rises 1.6% to $115.74 a barrel in Asian trading after an attack on a refinery in Saudi Arabia revives concerns about Middle East supply risks. India has partly cushioned the rupee from elevated oil prices through a special RBI window that allows refiners to buy dollars directly, but persistently high crude prices are still weighing on the currency outlook and capital flows.Markets and economists widely expect the Federal Reserve to leave rates unchanged on Wednesday. Even so, investors see any pause as potentially short-lived because inflation concerns remain in focus, and ING Bank analysts say they still expect a December rate increase while warning the policy decision may include as many as three dissents in favor of a hike.
Our earlier report on the RBI’s rupee defence detailed how the central bank has drawn down an estimated $75–$80 billion via spot dollar sales and dollar-rupee swaps since June, alongside steps like a special dollar window for oil companies. It noted that the combination of high oil prices, rising U.S. yields and equity outflows has intensified pressure on the currency, while some analysts questioned how long reserves can be used at this pace and pointed to around 97 per dollar as a key intervention threshold.
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