Indian rupee finds breathing room on modest inflows, exporter hedging

MUMBAI: The Indian rupee closed modestly stronger on Tuesday, supported by dollar sales from exporters and modest foreign inflows while traders held onto caution ahead of the U.S. Federal Reserve’s policy decision later this week.

The Indian rupee rose 0.2% to end the day at 89.8750 per dollar.

The currency had risen to 89.8475 earlier in the session but further gains were capped by importers stepping in to lock in hedges at more favourable levels, traders said.

“Till it (USD/INR) holds below 90.30, there is likely to be decent two-way merchant interest but a break above that could yet again cool activity from exporters,” a trader at a Mumbai-based bank said.

The currency has declined about 5% in 2025 so far, bogged down by weakness in trade and foreign portfolio flows alongside the drag from a missing trade deal with the U.S.

Deputy U.S. Trade Representative Rick Switzer will visit India on December 10-11, the Indian foreign ministry spokesperson said on Monday.

Elsewhere, Asian currencies were trading mixed on the day while the dollar held steady against a basket of peers as investors awaited a closely watched Fed decision due on Wednesday.

Bond investors are positioning for a shallow U.S. rate cut cycle and many Wall Street banks predict fewer Fed interest rate cuts in 2026 due to concerns over inflation and expectations of a more resilient U.S. economy.

“There are now high expectations of a ‘hawkish cut’ at Wednesday evening’s Federal Open Market Committee (FOMC) decision. We had felt that the short-end of the dollar’s upside was vulnerable to this FOMC event risk,” analysts at ING said in a note.

Investors will also focus on the release of Fed policymakers’ quarterly economic projections, including policy rate forecasts, also known as the “dot plot.”