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Rupee Under Pressure From Delayed US Rate Cuts

April 29, 2024

The Indian rupee closed lower against the U.S. dollar on Monday, settling at 83.41, down from its previous session’s close of 83.34.

SEE: USD makes significant gains against INR on VT Markets trading app.

Factors such as increased dollar purchases by foreign banks and weakness across Asian currencies shaped this outcome, driven by expectations that the U.S. might delay interest rate cuts.

Yen Rebounds, Dollar Index Dips

In global markets, the dollar index fell by 0.3% to 105.6 as the yen rebounded after briefly falling below the 160-per-dollar mark. This movement occurred during a trading session thinned by a holiday in Japan, which affected market liquidity and volatility.

You might be interested—Sakura Viewing in Japan is Now Cheaper with Weakening JPY – VT Markets

Indonesian Rupiah Declines

Among regional currencies, the Indonesian rupiah fell by 0.2%, marking the largest drop in the region. Analysts link these losses to a shift in expectations for U.S. monetary policy. Data showing stronger-than-expected U.S. inflation and economic activity has led to a reevaluation of when the U.S. will cut rates, which in turn has pushed up U.S. bond yields and strengthened the dollar.

A state-run bank’s foreign exchange trader noted that despite some early weakness in the rupee, where it approached 83.45 against the dollar, the currency might soon show some resilience.

Anticipating Federal Reserve Policy Decision

This week, the market’s focus will turn to the Federal Reserve’s policy decision on Wednesday. The central bank is likely to hold interest rates steady, but investors will closely watch Chair Jerome Powell’s comments for clues about the future direction of U.S. interest rates.

Market expectations now reflect a more conservative outlook for U.S. monetary easing, with only one rate cut expected in 2024.

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