By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee closed stronger on Tuesday, hitting a one-week peak, as expectations of a U.S. Federal Reserve rate cut kept the dollar weak against most currencies.
The rupee closed at 88.0525 per dollar, up 0.18% on the day after touching 88.02, its strongest since September 9.
Most Asian currencies also firmed, while the dollar slipped to a more than two-month low against the sterling and the euro. The dollar index was last down 0.3% at 97.
The Fed’s policy decision is due post-Indian market hours on Wednesday, where a 25-basis-points rate cut is fully priced in by money markets. Analysts attribute the dollar’s weakness to investor positioning heading into the event.
The rupee regained some footing after hitting its all-time low of 88.4550 last week amid persistent worries over the impact of steep U.S. tariffs on both trade and foreign portfolio flows.
Foreign investors have sold about $1 billion of local stocks over September so far on a net basis, taking the year-to-date outflow tally to about $16 billion.
On the day, India’s benchmark equity indexes, the BSE Sensex and Nifty 50 each closed 0.7% higher. For the year so far, the indexes have gained about 5%-7% but are lagging well-behind the 23% rise in MSCI’s gauge of Asian equities excluding Japan
“Reserve Bank of India’s intervention is expected to cap USD/INR around 89.0 amid external headwinds. However, the risk of further weakness persists if India fails to negotiate tariff levels lower,” analysts at ING said in a note.
The Indian central bank has stepped up its presence in the offshore non-deliverable forward market to support the rupee, Reuters reported earlier.
India and the United States are slated to hold trade talks on Tuesday after U.S. President Donald Trump struck a more conciliatory tone in statements last week and expressed optimism that the two countries could finalise a trade deal.
(Reporting by Jaspreet Kalra; Editing by Nivedita Bhattacharjee)
