Investors Eye US Fed Chair Powell’s Speech; Lower Inflation Raises Rate Cut Bets
Mumbai, May 15 — The Indian rupee slipped 32 paise to 85.64 against the US dollar in early Thursday trade, weighed down by weakness in domestic equities and cautious investor sentiment ahead of a key speech by US Federal Reserve Chair Jerome Powell.At the interbank foreign exchange, the local currency opened at 85.53 and soon fell to 85.64, marking a decline of 32 paise from its previous close. On Wednesday, the rupee had managed a modest 4-paise gain to settle at 85.32.
Market Mood Cautious Ahead of Powell’s Remarks
Traders noted that market participants are awaiting signals from Powell's upcoming address, which could offer insights into the Fed's stance on monetary policy easing. “His comments will be crucial in shaping expectations around future rate cuts by the US central bank,” said one forex analyst.Mixed Cues: Dollar Weakens, Crude Prices Fall
Despite the rupee’s fall, global factors offered some cushioning. The dollar index, which tracks the US currency against six peers, dropped 0.23% to 100.81. Brent crude futures also eased by 1.92%, trading at USD 64.82 per barrel, offering some relief for the rupee given India’s oil import dependence.Domestic Inflation Eases, Rate Cut Hopes Rise
According to CR Forex Advisors MD Amit Pabari, Wednesday’s rupee movement was influenced by wholesale inflation data. “India's WPI cooled to a 13-month low of 0.85% in April. This has strengthened hopes that the Reserve Bank of India may consider a rate cut in its June policy review,” he said.While a rate cut could support economic growth, it may exert downward pressure on the rupee in the short term due to increased money supply and reduced interest rate differentials with other economies.
Equities Decline, FIIs Remain Net Buyers
Meanwhile, Indian equity markets opened lower, adding pressure on the currency. The BSE Sensex fell 230.76 points to 81,099.80, while the NSE Nifty declined 54.95 points to 24,611.95 in early trade.Despite the downturn in equities, foreign institutional investors remained net buyers on Wednesday, purchasing equities worth ₹931.80 crore, according to exchange data.
The rupee’s trajectory in the coming sessions is expected to hinge on global central bank cues, domestic economic indicators, and foreign capital flows.