New Delhi: India’s foreign exchange market is poised for a cautiously optimistic start on Tuesday, with the rupee expected to open stronger against the U.S. dollar. A sharp surge in expectations of an imminent Federal Reserve rate cut and clear signs of intervention from the Reserve Bank of India (RBI) have combined to support sentiment around the currency.
The global environment turned decisively favorable for emerging-market currencies after traders increased the probability of a December Federal Reserve rate cut to almost 85%, a dramatic jump from about 40% only a week earlier. This shift follows softer U.S. labour market signals and public remarks from senior Fed officials, including Christopher Waller and John Williams, who suggested that a rate reduction would not jeopardize progress on inflation.
These expectations have already filtered into price movements. Offshore markets saw the one-month non-deliverable forward for the rupee trade around ₹89.06–₹89.10 per U.S. dollar, compared to the previous close of ₹89.23. For traders, this represents the clearest sign yet that global forces may temporarily ease pressure on the Indian currency.
However, the rupee’s recovery is not being left to global forces alone. The RBI stepped in promptly on Monday after the currency slipped past the unofficially watched level of ₹88.80, a threshold the central bank had defended for weeks. Market participants said the intervention coming early in the trading session was a deliberate signal of the RBI’s intolerance for steep or sudden depreciation.
One Mumbai-based trader noted that Monday’s actions conveyed a direct message: the central bank “will not allow the market a free run,” reinforcing confidence that the rupee will not be allowed to slide unchecked. With India still grappling with inflationary pressures, any significant weakening of the currency risks making imports pricier and destabilizing broader market stability.
While improved global sentiment and central-bank support have placed the rupee on firmer ground, the recovery is far from guaranteed. Foreign investors remain cautious recent data showed that overseas funds pulled out US$182 million from Indian equities and almost US$50 million from bonds in a single day. Such outflows underscore the fragility of sentiment and the possibility that global uncertainties could trigger further sell-offs.
Domestic risks also persist. Rising commodity prices, particularly crude oil, continue to pose a threat. If oil costs rise sharply, India’s import bill will swell, exerting downward pressure on the rupee and complicating the RBI’s inflation management efforts.
Tuesday’s trading session and the days that follow will hinge on a combination of global and domestic signals. U.S. economic data releases are expected to influence market expectations significantly and could either reinforce or weaken hopes of a December rate cut. Meanwhile, investors will be closely watching the RBI’s next moves any hint of additional intervention or policy shifts will likely influence short-term currency dynamics.
Overall, the rupee may be ready for a steadier opening, but its path remains delicate. A supportive global backdrop has offered temporary relief, yet sustained resilience will depend on consistent capital flows, controlled inflation, and the RBI’s continued vigilance.