By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee fell to its record closing low on Wednesday as an uptick in the dollar index pressured the local unit ahead of the U.S. Federal Reserve’s monetary policy decision later in the day.
The rupee ended at 83.40 against the dollar, compared with its close of 83.3875 in the previous session.
The currency held in a tight range of 83.3850 and 83.4050 through the session as the central bank likely intervened to prevent the rupee from dropping further, five traders said.
The rupee hit a record low of 83.42 on Nov. 10.
The dollar index rose 0.2% to 103.97, weighing on other Asian currencies as well. The Philippine peso led losses with a drop of more than 1%.
The Fed will deliver its policy decision during U.S. trading hours later in the day.
While it is widely expected to hold rates steady, investors will pay close attention to the central bank’s economic projections and dot plot for cues on how well-placed market expectations are on the future trajectory of policy rates.
Investors are currently pricing in that rate cuts could begin as soon as next May, according to the CME Group’s FedWatch tool.
“Markets hope that slowing inflation might prompt central banks, including the Fed, to tone down their hawkish stances,” DBS Bank said in a note.
U.S. consumer inflation data on Tuesday showed that the core consumer price index (CPI) increased, as expected, by 0.3% month-on-month in November.
The rupee is unlikely to have a sharp reaction to the Fed’s decision or its projections, said Sajal Gupta, head of forex and commodities at Nuvama Wealth Management’s institutional desk.
The rupee has been well contained by the RBI which is likely to persist in the near term, Gupta added.
(Reporting by Jaspreet Kalra; Editing by Savio D’Souza)