Updated March 20th, 2024 at 16:26 IST

Rupee hits 2-month low amid importer Dollar demand, awaits Fed decision

Closing at 83.1575 against the US Dollar, the Rupee weakened by 0.15% compared to its previous close of 83.0350.

Reported by: Business Desk
Rupee versus Dollar | Image: Unsplash
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Rupee vs Dollar: The Indian Rupee experienced a decline, reaching its lowest level in two months on Wednesday, as importer demand for the Dollar, particularly from oil companies, coupled with debt repayment outflows, exerted pressure on the currency. Additionally, weakness in most Asian currencies contributed to the Rupee's fall, according to traders.

Closing at 83.1575 against the US Dollar, the Rupee weakened by 0.15 per cent compared to its previous close of 83.0350. During the session, the Rupee touched an intraday low of 83.17, marking its weakest level since January 18.

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Traders noted sustained Dollar demand from local oil companies and other importers as a primary factor driving the Rupee lower. The Dollar-Rupee overnight swap rate also faced pressure, indicating a potential shortage of cash Dollars.

Intervention by the Reserve Bank of India to absorb Dollar inflows further exacerbated the shortage of Dollars, alongside corporate payment and equity-related outflows, according to a foreign exchange trader.

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Sajal Gupta, head of forex and commodities at Nuvama Professional Clients Group's institutional desk, commented that the Rupee has returned to its mean and is unlikely to significantly weaken from current levels, with 83.20-83.25 serving as strong support.

Meanwhile, the Dollar index rose nearly 0.3 per cent to 104.14, reaching its highest level in nearly three weeks, while most Asian currencies experienced declines.

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As investors awaited the US Federal Reserve's interest rate decision later in the day, they remained attentive to any changes in the Fed's interest rate projections and commentary from Chair Jerome Powell. In December, the Fed's dot plot indicated expectations for three cuts of 25 basis points each over 2024.

"While the US central bank is widely expected to keep rates unchanged later in the day, investors will keep a close eye on any changes to the Fed's interest rate projections and commentary from Chair Jerome Powell," stated ING Bank in a note, highlighting the potential implications for the Dollar amidst a backdrop of increased US rates.

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(With Reuters inputs.)

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Published March 20th, 2024 at 16:26 IST