Rupee hits new low of 83.57 against US dollar ahead of Fed meeting

The rupee settled at a new closing low of 83.57 against the US dollar on Tuesday, tracking the rise in the dollar index and increased demand for the greenback among oil importers, according to dealers. The rupee closed at 83.51/$ on Monday.

The dollar index strengthened by 0.1 per cent to 105.25 ahead of the US Federal Open Market Committee meeting outcome, on the expectations of further delay in rate cuts after stronger-than-expected non-farm payroll data released last week.

“The dollar index was up because of the caution ahead of the US Federal Reserve (Fed) meeting outcome on Wednesday,” said V R C Reddy, head of treasury at Karur Vysya Bank.

“But the rupee is unlikely to breach the 83.6 per dollar mark. It will stabilise around these levels,” he added.

Market participants speculated that the Reserve Bank of India (RBI) intervened in the foreign exchange market by selling dollars, which protected the rupee from further depreciation.

The local unit had a record intraday low of 83.58 per dollar on April 19 of the current year.

“RBI was suspected to have sold dollars at 83.5 and 83.55. The rupee is expected to be in the range of 83.45 per dollar to 83.7 per dollar on Wednesday, with a close eye on the RBI as to whether it wants the rupee to depreciate any further,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

Traders now eye the US inflation data for further cues on the movement of the local unit.

“Participants are keenly awaiting the US Consumer Price Index data release on Wedesday, which is crucial for market movements. Additionally, the upcoming Fed policy and statement are significant, as they will provide projections and guidance on future economic conditions. These events will heavily influence the dollar and consequently the rupee’s performance," said Jateen Trivedi, vice-president, commodity and currency, LKP Securities.

The rupee has depreciated by 0.1 per cent in June so far. In the current financial year (2024-25), it has depreciated by 0.2 per cent. Meanwhile, in the current calendar year (2024), the rupee has depreciated by 0.4 per cent.

The Indian unit is expected to trade with a negative bias in the near term before regaining ground against the dollar on the back of foreign inflows.