Indian rupee slips before Fed decision; traders say RBI intervention to cap bearish bias

Asian currencies were mostly weaker on the day with the Indonesian rupiah, down 0.3%, leading losses

By Reuters

Published: Wed 18 Dec 2024, 12:50 PM

The Indian rupee fell marginally on Wednesday ahead of the crucial Federal Reserve policy decision later in the day, with traders expecting interventions by the Reserve Bank of India (RBI) to blunt the negative outlook on the local unit.

The rupee was at 84.9225 against the U.S. dollar at 10:05 a.m. IST, against its close of 84.8950 in the previous session.

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The currency had weakened to its all-time low of 84.93 on Tuesday, hurt by concerns about India's merchandise trade deficit, opens new tab, opens new tab rising to a record high and due to outflows from local stocks.

Foreign investors net sold over $700 million of equities in the previous session, according to provisional exchange data.

"Quite likely that the Reserve Bank of India will be on offer (on USD/INR) near 84.93-84.94 levels which should limit intra-day gains," a trader at a state-run bank said.

Routine interventions by the RBI have supported the rupee over recent sessions as the currency has been under pressure from slowing economic growth and elevated dollar bids in the non-deliverable forwards market.

Asian currencies were mostly weaker on the day with the Indonesian rupiah, down 0.3%, leading losses. The dollar index was little changed at 106.9.

The Fed is widely expected to deliver a 25-basis-point rate cut during U.S. market hours on Wednesday. The focus will be on whether policymakers make any hawkish revisions to their future interest rate projections.

In September, the median based on their projections indicated 100 bps of rate cuts over 2025.

"Uncertainty remains about future monetary policy actions, especially with the incoming Trump administration's potential tariff hikes, which could have severe inflationary consequences. This could slow the pace of Fed rate cut in 2025," MUFG Bank said in a note.

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