The Indian rupee at Wednesday’s open is unlikely to take advantage of the decline in the dollar, which was triggered by rising expectations of a US rate cut next month, with traders pointing to the currency’s inability to sustain the previous session’s brief rally.
The 1-month non-deliverable forward indicated the rupee will open flat-to-slightly higher versus the US dollar. It settled at 89.22 on Tuesday.
The rupee briefly strengthened past the 89 mark on Tuesday, only to be forced back by persistent dollar demand. Bankers said that dollar demand, largely from importers and in the offshore market, kicked in and blunted the rally.
Importers locking in dollar/rupee rates on dips has been a consistent feature in the market in recent weeks, making it difficult to sustain a rally.
The way the rupee faded on Tuesday “was disappointing” and speculators counting on a meaningful rally “will now back off”, a currency trader at a private sector bank said.
Interbank dealers will be cautious before leaning into the dollar weakness, he added.
The dollar index fell on Tuesday, slipping below the 100 mark, while US Treasury yields dropped on rising conviction that the Fed will deliver a third consecutive rate cut at its December meeting.
Weak US data, dovish remarks from Fed officials and a Bloomberg report suggesting Kevin Hassett could replace Jerome Powell when his term concludes in May added to expectations of a softer Fed stance, making a December cut appear increasingly likely.
The odds of a rate cut have pushed well past 80%, a move that began after New York Fed President John Williams signalled that interest rates could fall in the near term.
Those expectations were further juiced by comments from San Francisco Fed President Mary Daly and Fed Governor Christopher Waller, both indicating support for a December cut.
Although Daly is not a voting Fed member this year, her comments mark a departure from her previously cautious tone, Morgan Stanley said in a note.
Key indicators
- One-month non-deliverable rupee forward at 89.35; onshore one-month forward premium at 14.5 paise
- Dollar index down at 99.66
- Brent crude futures up 0.4% at $62.8 per barrel
- Ten-year US note yield at 4.01%
- As per NSDL data, foreign investors sold a net $431.7 million worth of Indian shares on Nov. 24
- NSDL data shows foreign investors sold a net $49 million worth of Indian bonds on Nov. 24
Published on November 26, 2025
