Indian rupee dips after choppy trading, Fed’s rate decision in focus

MUMBAI: The Indian rupee slipped on Wednesday, ending a session of back-and-forth price action shaped by portfolio flows, likely maturity of positions in the non-deliverable forwards market  and caution ahead of the Federal Reserve’s policy decision.

The Indian rupee closed at 89.9650 to the U.S. dollar, slightly weaker than the close of 89.8750 in the previous session.

The currency swung through the day in an 89.77–90.08 band, after finding some respite from last week’s record low of 90.42.

Early gains sparked by likely inflows tied to equity fundraising faded as dollar bids picked up after noon, a trader at a private bank said.

Asian currencies were mostly subdued, while the dollar index slipped to 99 ahead of the Fed decision.

India’s benchmark indexes, the BSE Sensex and Nifty 50, fell 0.3% each, mirroring modest declines across regional markets.

The Fed is widely expected to cut rates by 25 basis points, with traders set to parse policymakers’ commentary and rate projections. Investors have scaled back expectations for 2026 cuts on persistent inflation concerns and signs of a more resilient U.S. economy.

Money markets are pricing in about two more Fed cuts next year, on top of the one expected later on Wednesday. Odds of a January 2026 cut stand near 21%.

“How forcefully (Fed Chair) Powell communicates a message of pause is likely most important for the dollar but steps to add liquidity to the markets could also play a role in FX reaction,” MUFG said in a note.

Risks of a hawkish tilt at the Federal Reserve also contributed to pegging back dollar-rupee far forward premiums with the 1-year implied yield down 4 basis points at 2.54%.