US dollar strengthened early Thursday as the Indian rupee slipped by 32 paise to 85.64, reflecting cautious investor sentiment ahead of the Federal Reserve Chair Jerome Powell’s much-anticipated speech. Domestic equities showed weakness, contributing to the rupee’s depreciation, though a softer dollar and easing crude oil prices helped limit the slide. Market participants are closely watching Powell’s comments for insights into future monetary policy, which could influence the rupee’s trajectory in the coming weeks.
Rupee Movement and Market Dynamics
The Indian rupee opened at 85.53 against the US dollar in the interbank foreign exchange and gradually weakened to 85.64, losing 32 paise compared to its previous close. This downward move aligns with a negative trend in domestic equity markets, where the BSE Sensex dropped by 230.76 points to 81,099.80, and the Nifty fell 54.95 points to 24,611.95. Despite the rupee’s fall, some support came from a weaker US dollar index, which was down 0.23 percent at 100.81, and declining Brent crude oil prices, which fell by nearly 2 percent to USD 64.82 per barrel in futures trade.
Investors remain cautious ahead of the Federal Reserve Chair Jerome Powell’s speech, which is expected to provide crucial guidance on the direction of US monetary policy. Powell’s stance on interest rates and potential easing measures will be pivotal for global markets and currency valuations, including the rupee.
Inflation Trends and RBI Rate Cut Expectations
Recent data showing India’s Wholesale Price Inflation (WPI) cooling to a 13-month low of 0.85 percent in April has raised hopes that the Reserve Bank of India (RBI) might consider another interest rate cut in its upcoming June monetary policy review. According to Amit Pabari, Managing Director at CR Forex Advisors, while such a rate cut could boost economic growth over the medium term, it may also put short-term pressure on the rupee due to increased money supply and narrowing interest rate differentials with the US.
Foreign institutional investors remained net buyers in the equity market, purchasing shares worth Rs 931.80 crore on Wednesday, reflecting continued confidence in Indian equities despite short-term currency volatility.
