The rupee opened 13 paise higher at 95.72 against the US dollar on Wednesday, 29 July, supported by recent gains, although volatile crude oil prices and concerns over the Federal Reserve’s interest rate outlook capped the upside.
The domestic currency has strengthened over the past three sessions, with traders attributing the recovery partly to likely intervention by the Reserve Bank of India (RBI). However, fluctuations in oil prices and the possibility of a hawkish signal from the US Federal Reserve could pose challenges to the rupee’s rebound, traders said, according to Reuters.
“The RBI is currently a major anchor for the rupee,” a currency trader at a bank said, adding that the central bank’s continued presence in the market, particularly through interventions around market opening hours, is expected to provide further support to the currency.
Dollar remains firm ahead of key fed decision
The US dollar continued to hold near recent highs as investors stayed cautious ahead of the Federal Reserve’s policy decision. Market participants are closely tracking the central bank’s next move, with a stronger dollar and elevated oil prices posing challenges for emerging market currencies, including the Indian rupee.
Fed faces inflation versus debt concerns
The Federal Reserve’s two-day policy meeting has placed Chair Kevin Warsh in a challenging position, with markets weighing the possibility of a rate hike against broader economic risks.
Experts noted that persistent inflation pressures and resilient economic data provide a case for tighter monetary policy. However, concerns over rising US debt levels and higher borrowing costs remain key factors that could influence the Fed’s decision.
Analysts said the Fed will also need to balance multiple factors, including political pressure, the transition in leadership, and market expectations. While investors largely expect a status quo decision, the reduction in forward guidance could leave room for surprises from the central bank.
RBI steps up support for Rupee
Back in India, market experts highlighted the Reserve Bank of India’s (RBI) active role in supporting the rupee amid heightened volatility.
Bankers said the central bank has increased its market intervention over the past few sessions by selling dollars, with interventions reportedly timed around key trading periods to maximise impact. According to market estimates, the RBI sold around $8–9 billion in dollars on Friday.
These measures, along with improving foreign inflows, have helped the rupee recover from recent lows. The domestic currency strengthened to a two-week high of 95.64 per dollar on Tuesday before closing at 95.85.
Experts added that India has attracted nearly $40 billion in fresh inflows since early June following recent policy measures, providing additional support to the currency.
Market awaits next trigger
Analysts believe the rupee’s near-term direction will depend on a combination of global factors, including the Fed’s policy stance, movements in crude oil prices, and the dollar index trend. While RBI intervention has provided stability, sustained recovery will require support from broader macroeconomic conditions.
Rupee Outlook
According to Amit Pabari, MD, Research Team, CR Forex Advisors, the 95.50-95.60 zone remains key support for USDINR. With oil back in the driver’s seat and the Fed verdict pending, as long as this support level holds, the broader trend remains tilted in favour of a stronger dollar. We continue to expect USDINR to move towards the 96.80-97.00 zone.
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