The falling Indian rupee is keenly awaiting the US Federal Reserve (FED) meeting next week that is widely expected to cut rate which could reduce pressure on depreciating rupee. Indian Rupee slid past 90 per dollar this week for the first time.
The FED meeting is scheduled to be hold next week, traders are pricing in an 89% chance of a quarter-point rate cut next week, according to the CME FedWatch tool, with about 89 basis points of easing expected by the end of next year.
Fed cuts may boost Asia FX, but rupee’s challenges persist
According to a report by Bloomberg, “Further Fed easing is likely to be supportive for Asia FX in general,” said Wee Khoon Chong, a senior Asia Pacific market strategist at BNY in Hong Kong.
However, among Asian currencies, the yuan, Taiwan dollar and Korean won are likely to perform the best due to strong growth momentum and sound fiscal policies. India’s rupee, on the other hand, still faces headwinds, including high US tariffs and downside risks to growth, he said.
Rupee sinks to record low, dollar index slips nearly 9% in 2025
Important to note that fall in rupee is coming at a time when Dollar is also weakening. Rupee has hits record low of 90.42 in Thursday, down 5.5% this year. The US Dollar Index (DXY), which measures the dollar’s value against a basket of six foreign currencies, was 0.05% up at 99.93 on Thursday morning. The index is down nearly 9% for the year.
“We expect Powell will signal a cautious meeting-by-meeting approach to future rate cuts, to balance concerns about softness in hiring against elevated inflation and inflation uncertainty,” ANZ strategists said, according to Reuter.
BofA Global Research also expects the US FED to cut interest rates by 25 basis points at its December meeting. “By cutting rates next week, we think the Fed would increase the risk of pushing policy into accommodative territory, just as fiscal stimulus kicks in,” BofA said.
