Indian Rupee Near Record Low – Impact on Markets

The Indian rupee is expected to hover near its historic low on Wednesday due to concerns about U.S. economic growth leading to a sell-off of risk assets. The one-month non-deliverable forward rate indicates that the rupee will open at 83.96-83.97 against the U.S. dollar, compared to 83.9675 in the previous session. The rupee's lowest point so far was 83.9725, reached in the first week of the last month. Japan led the Asian indexes with a drop of over 3% following the Wall Street sell-off. The S&P 500 index had its worst day in a month, and futures point to further losses ahead. Weak data on U.S. industrial activity and a dramatic plunge in Nvidia's stock dampened investor risk appetite. A currency trader noted that the Indian rupee would find support from the "ever-present" Reserve Bank of India, declining oil prices, and falling yields on U.S. Treasuries. He added that the stock market sell-off had no impact on Asian currencies and that the rupee is likely to move between 83.94 and 83.97 during the day. **Probability of a 50 Basis Points Cut by the Fed Increases** In light of the stock market losses and disappointing U.S. industrial production, investors are increasingly betting on a 50 basis points rate cut by the Federal Reserve at the meeting on September 17-18. According to the CME FedWatch Tool, the probability for this has risen from 30% to 42%. Yields on U.S. Treasuries declined amid growth concerns. U.S. industrial data continues to show a shrinking sector, with key components like new orders and production weakening, according to a report by ING Bank. Meanwhile, oil prices in Asia continued to fall, providing a welcome relief for the rupee and other Asian oil importers. Brent crude oil prices have declined by 15% this quarter. **Key Indicators:** - One-month non-deliverable rupee forwards at 84.04; onshore one-month forward premium at 8 Paise. - According to NSDL data, foreign investors bought Indian equities worth a net $686.7 million on September 2. - NSDL data also shows that foreign investors bought Indian bonds worth a net $4.4 million on September 2.