Indian Rupee resumes decline amid hawkish Fed expectations

The Indian Rupee (INR) experienced a decline against the US Dollar (USD) on Wednesday, as traders anticipated a continuation of the Federal Reserve's (Fed) monetary tightening cycle. The USD/INR pair rose to approximately 95.75, benefiting from the US Dollar's outperformance. The US Dollar Index (DXY) also gained 0.25%, reaching near 100.80, its highest level in over seven weeks.

Traders saw a nearly 90% chance of at least one more interest rate hike this year, supported by hawkish comments from regional Fed presidents. Chicago Fed President Austan Goolsbee noted that supply shocks have become more frequent, harder, and longer-lasting, reinforcing the need for tighter Fed policy. Fed Vice Presidents warned of potential additional hikes, but provided no specific guidance on the magnitude of rate increases.

Meanwhile, oil prices dropped due to hopes of US-Iran diplomacy, benefiting currencies like the INR. The HSBC Composite PMI for September rose to 56.5 from 54.3, driven by robust manufacturing and service sector activity. USD/INR traded at 95.75, maintaining a slight bullish bias above the 20-period exponential moving average (EMA) at 95.54, with support at the 20-period EMA near 95.54 and the September 17 high near 96.10 as a critical hurdle.