Asian currencies outperform the Indian rupee as investors scrutinize the Federal Reserve's upcoming monetary policy announcements.
In a significant announcement on September 18, 2025, V. Anantha Nageswaran, the Chief Economic Adviser (CEA) of the Indian government, shared promising news regarding trade talks between India and the USA. The CEA stated that the USA might soon remove the additional 25% punitive tariffs on Indian goods and potentially reduce the reciprocal tariff rate from 25% to between 10-15%. This positive development was made at an event in Kolkata on Thursday.
The Indian economy responded positively to this news, with India's benchmark equity indexes, the BSE Sensex and Nifty 50, ending the day up nearly 0.4% each. However, the Indian rupee saw a slight dip, closing at 88.13 against the U.S. dollar, down 0.36% on the day.
The rupee's movement was influenced by several factors. Tightness in rupee liquidity due to income tax outflows led to an increase in daily funding costs, causing banks to resort to tapping the foreign exchange swap market to raise funds. This, in turn, led to a rise in the Wednesday-Thursday swap rate, which peaked at 0.50 paisa. The elevated cost of borrowing via swaps indicates a higher rupee interest rate, with current support for the rupee pegged near 88.45 and resistance near 87.75-87.80.
Traders expect the rupee to see two-way price action in the near-term and to track broader dollar moves. The US dollar, after a brief dip, has been on the rise. It was up from a 3-1/2-year low hit in the immediate aftermath of the Federal Reserve's policy announcement. Analysts at HSBC stated that the Fed's policy was consistent with market expectations but bordered on the hawkish side. The US dollar was a touch lower at 96.9 against a basket of major currencies.
Investors have also stepped up short positions on the Indonesian rupiah and the Indian rupee, driven by concerns over central bank rate cuts in Indonesia and U.S. tariffs affecting India. This sentiment has contributed to the downward pressure on Asian currencies, with Asian currencies being down between 0.1% to 0.6%.
In conclusion, the Indian economy is facing challenges in the form of tight rupee liquidity and potential U.S. tariffs, but the positive trade talks with the USA offer a glimmer of hope. The rupee's movement will continue to be influenced by these factors, as well as broader dollar moves, in the near future.
Read also:
- Planned construction of enclosures within Görlitzer Park faces delays
- Foreign financial aid for German citizens residing abroad persists
- Hulk Hogan's successful transformation of his wrestling persona into a lucrative business entity
- United States and Russia prepared to delve deeper into negotiations regarding the Sakhalin 1 oil and gas project
