Rupee slips 21 paise to 88.43 against dollar as Fed signals no December rate cut

The rupee fell 21 paise to 88.43 against the US dollar on Thursday amid a stronger greenback after Fed Chair Jerome Powell said a December rate cut is not certain. Weak equities and FII outflows added to the pressure.

Mumbai: The rupee depreciated 21 paise to 88.43 against the dollar in early trade on Thursday, weighed down by the strength of the American currency after Fed Chairman Jerome Powell indicated that the rate cut in December is not given.

Forex traders said the dollar index rose to 99.05 and the 10-year yield to 4.07 per cent despite the 25 bps rate cut by the FED overnight.

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At the interbank foreign exchange, the rupee opened at 88.37 against the US dollar before dropping to 88.43, down 21 paise from its previous close.

On Wednesday, the rupee had settled at 88.22 against the US dollar.

“The US dollar index rose from Wednesday to 99.02 after the FED Chair announced that another rate cut this year is ‘not a foregone conclusion’ as the dollar found support at lower levels even after the rate cut.

“Markets are also weighing the effects of the ongoing US shutdown and the mixed economic signals,” said Anil Kumar Bhansali, Head of Treasury and Executive Director Finrex Treasury Advisors LLP.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 99.06.

Brent crude, the global oil benchmark, was trading 0.25 per cent lower at USD 64.75 per barrel in futures trading.

US President Donald Trump on Wednesday said he respects Indian Prime Minister Narendra Modi and that a great deal is coming with the country.

“We await the same as on such a day the rupee will gain by 40-50 paise. Asian currencies were generally on the upside, and therefore, we expect the rupee to be bought against the dollar,” Bhansali added.

On the domestic equity market front, Sensex declined 297.96 points to 84,699.17 in early trade, while the Nifty dropped 90.05 points to 25,963.85.

Foreign Institutional Investors sold equities worth Rs 2,540.16 crore on Wednesday, according to exchange data.