Indian Rupee Holds Steady at 83.49 Against US Dollar Ahead of Fed Policy Decision

The Indian rupee remained steady at 83.49 against the US dollar on May 2, 2023, as investors awaited the outcome of the US Federal Reserve's policy meeting. The rupee has been facing some selling pressure due to month-end dollar demand from importers and weakness in major Asian currencies. However, confidence in India's economic stability continues to support today's share market, which may lift the rupee in the near term.

Market participants will closely monitor the Federal Reserve's interest rate decision and commentary on Wednesday, as a cautious tone from Fed Chair Jerome Powell could boost the US dollar and create headwinds for the rupee. The upcoming ISM Manufacturing PMI data and US employment report may also provide insights into the FOMC rates outlook. On the Indian side, the release of the HSBC Manufacturing PMI for April is scheduled for Thursday.

Why this matters: The Federal Reserve's policy decision and the trajectory of US interest rates have significant implications for global financial markets and emerging economies like India. Higher US interest rates can lead to capital outflows from emerging markets, putting pressure on their currencies. The Indian rupee's performance against the US dollar is closely watched by investors, businesses, and policymakers, as it impacts trade, investments, and overall economic stability.

The rupee maintains a bullish outlook, trading above the 100-day Exponential Moving Average, with the 14-day Relative Strength Index suggesting support levels are likely to hold. The immediate resistance for the USD/INR pair is seen near 83.50, with the potential to reach an all-time high of 83.72 and the psychological level of 84.00. A decisive break below 83.23 could drag the pair back to 83.15, with the next support level at 82.78.

Devang Shah, Head of Fixed Income at Axis Mutual Fund, noted that the Reserve Bank of India is maneuvering through the intricate landscape of interest rates, inflation dynamics, and external risks while maintaining its monetary policy stance. The RBI's active intervention has helped curtail volatility in the rupee, although its reserves have fallen slightly.

The Indian rupee closed at 83.48 against the US dollar on Monday, declining 10 paise, as investors remained cautious ahead of the Fed's monetary policy decision. However, a robust sentiment in the domestic equity market and softening crude prices cushioned the downfall in the Indian currency. The BSE Sensex gained 941.12 points or 1.28% to close at 74,671.28, while the NSE Nifty rose 233.45 points or 1% to end at 22,643.40.

Key Takeaways

• Rupee steady at 83.49 vs USD, awaiting Fed policy outcome
• Rupee faces selling pressure due to month-end dollar demand
• Fed's interest rate decision and commentary to impact rupee
• Rupee maintains bullish outlook, with resistance at 83.50
• RBI's intervention helps curtail rupee volatility, reserves down