The rupee fell 0.1% to 95.74 per dollar from a close of 95.59 in the previous session.
Asian currencies fell 0.1% to 0.3% as investors watched oil prices and Fed rate expectations. The dollar index has risen more than 1% since the Fed raised rates last week as bets on further tightening grew. Interest rate futures markets have baked in about 75 basis points worth of hikes over the next 12 months.
“The US Federal Reserve has started hiking, and markets are pricing in more hikes. If the RBI does not respond, India’s monetary policy misalignment with tightening global financial conditions would widen,” analysts at ANZ said in a note.
“With rate differentials already compressed, that would leave the INR more exposed to any global risk-off episode.”
On Wednesday, dollar sales by state-run banks — most likely on behalf of the Reserve Bank of India — helped limit the currency’s losses, traders said. The central bank also likely conducted dollar-rupee sell/buy swaps to drain excess cash in the banking system.
The swaps were concentrated in the January 2027 maturity while a portion was for October 2027 maturity as well, a trader at a Mumbai-based bank said.
Oil prices, meanwhile, held below $100 per barrel, kept in check by improving Gulf crude supplies and growing hopes for a diplomatic resolution to the US-Israeli war with Iran.
