The Indian rupee encountered resistance on Tuesday, following a surge propelled by the U.S. dollar's difficulties, just a day before the Federal Reserve's much-awaited interest rate decision. By 10:28 a.m. IST, the rupee stood at 83.84 against the U.S. dollar, compared to 83.8875 in the previous session. A currency trader noted that the dollar/rupee pair was encountering bids from two major public sector banks, though it was unclear whether they were acting on behalf of the Reserve Bank of India or their clients.
Asian currencies generally strengthened, and the dollar index remained stable at 100.70, having declined over the previous three sessions. Srinivas Puni, managing director at QuantArt Market Solutions, a forex advisory firm, stated that the U.S. dollar 'continues to be under pressure' due to the solidifying hopes of a Fed rate cut ahead of the central bank's meeting. With high expectations for a 50 basis point rate cut by the Fed, there is a risk of market disappointment if they only cut by 25 basis points or issue a more 'moderate' statement, according to Puni.
The likelihood of a 50 basis point cut has risen to nearly 70% from just 30% a week ago. Media reports indicating that Fed officials are contemplating a 50 basis point cut have prompted investors to bet on a more aggressive move by the Fed during its two-day meeting, which is set to commence later today. ANZ Bank analysts noted that concerns over a slowdown in the labor market are overshadowing inflation worries.
