Indian Rupee Stable Ahead of US Federal Reserve Decision

The Indian Rupee remains nearly unchanged on Tuesday, as traders predominantly expect a stable exchange rate ahead of the highly anticipated interest rate decision by the US Federal Reserve. The one-month non-deliverable forward suggests an opening rate of 83.87 to 83.88 against the US Dollar, almost identical to Monday's closing rate of 83.8875. While Asian currencies are benefiting from heightened expectations of a significant rate cut by the Fed on Wednesday, the Rupee is trending differently. It is pressured by ongoing US Dollar demand from local importers and the likely absorption of inflows by the Reserve Bank of India, according to traders. State banks continue to act as buyers for USD/INR around the 83.85 range, said a trader from a foreign bank. This dollar demand could be related to client movements, but the steadily increasing foreign exchange reserves of the Reserve Bank of India also suggest that it is absorbing dollars. India's foreign exchange reserves have risen to a record $689.2 billion as of September 6, according to central bank data. The Dollar Index was at 100.6 after a 0.4% decline on Monday, as the probability of a 50 basis point rate cut by the Fed increased from 50% on Friday to 67%, according to the CME FedWatch Tool. US bond yields fell while most Asian currencies gained, with the Korean Won recording the strongest increase of 0.8%. The MUFG Bank noted in a statement that the US retail sales data, to be released later today, could be significant and may help clarify if the Fed will reduce its rates by 25 or 50 basis points.