The US central bank decided to hold interest rates unchanged in the 3.75 percent to 4.00 percent range, putting mild downward pressure on the greenback. The rupee drew further strength from domestic equity gains, with the BSE Sensex advancing by more than 550 points in morning trade. However, Brent crude holding above $114 per barrel and firm yields remain lingering challenges for broader currency stability. Market analysts expect gradual range-bound movements rather than sharp currency shifts due to active reserve management.
Key points
Active market presence and massive foreign exchange reserves of roughly $721 billion are…: Active market presence and massive foreign exchange reserves of roughly $721 billion are shielding the domestic currency.
Softer US economic data could bolster emerging market currencies, whereas higher inflatio…: Softer US economic data could bolster emerging market currencies, whereas higher inflation figures may trigger December rate hike expectations.
Equity market momentum surged as the BSE Sensex rose over 550 points to cross the 73,409…: Equity market momentum surged as the BSE Sensex rose over 550 points to cross the 73,409 mark.
Sources checked by our analysis pipeline: 1
NEW DELHI: Rupee strengthened against the US dollar in early trade on Thursday, rising 11 paise to 95.17 after the American currency softened following the US Federal Reserve's latest policy decision. The currency opened at 95.20 at the interbank foreign exchange market before moving higher. It had settled at 95.28 against the dollar in the previous session.
The US central bank kept its interest rates unchanged in the 3.75 per cent–4.00 per cent range, as expected. Despite the widely anticipated decision, the market response was mildly negative for the dollar, forex traders said.
The rupee continues to face pressure from elevated crude oil prices and firm US yields. However, foreign exchange reserves of around $721 billion, a recent improvement in portfolio flows and the Reserve Bank of India's presence in the market are providing support to the currency.
"We therefore see a gradual upward bias in USD-INR within the range, rather than evidence of a disorderly move," Anindya Banerjee, head of commodity and currency research, Kotak NEO told PTI.
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