MUMBAI: The Indian rupee may weaken past a near-term support level on Wednesday after U.S. inflation data lifted the dollar to a near one-month high, despite doing little to shift expectations on the Federal Reserve’s policy path.
The 1-month non-deliverable forward indicated the rupee will open in the 90.26-90.30 range versus the U.S. dollar, having settled at 90.19 on Tuesday.
The 90.28–90.30 region is widely viewed by market participants a near-term support for the rupee, having become a level where the Reserve Bank of India has been seen stepping in.
Traders noted that the RBI had intervened heavily around those levels last Monday, and the currency once again found support in the same region on Tuesday likely on the back of dollar sales by the central bank.
“There’s a decent chance the market pushes through 90.30 today,” a currency trader said.
“A break opens up room towards 90.50–90.60, and then it becomes a question of how much the RBI is willing to step up.”
Dollar finds buyers
The dollar index inched higher in Asian trade, extending Tuesday’s 0.3% advance. Headline U.S. inflation for December came in line with expectations, while the core measure was slightly softer than markets had priced in.
The marginally softer core reading did little to alter expectations for the Fed’s policy path, with markets still seeing the first rate cut of 2026 only around the June meeting, leaving the dollar largely supported.
The key message is still a contained inflationary impact from tariffs at an aggregate level, while details were quite volatile and showed continued lingering signs of impact of data unavailability from the U.S. shutdown, MUFG Bank said in a note.
“Overall, we still think that the Fed will cut rates more and faster than what is priced by markets right now,” the bank said.
Interest rate markets are currently pricing in about two Fed rate cuts in 2026.
American Dollar Exchange Rate