Rupee slips as dollar gets Fed hike expectations tailwind
On September 23, the Indian rupee ended weaker at 95.74 against the dollar amid global financial trends. Expectations of further US Federal Reserve rate hikes have increased the strength of the dollar. Asian currencies also experienced declines, with some falling 0.3%. Despite this, state-run banks helped limit the rupee's losses through dollar sales.
Gold slipped on Wednesday as the Federal Reserve's anticipated interest rate hikes boosted the US Dollar and impacted the non-yielding metal. The XAU/USD pair traded at around $4,315, declining by 1.0% for the day. The US Dollar Index (DXY) reached a two-month high of 100.85 despite a fall in oil prices following positive developments in the Middle East.
The Fed's rate hike to the 3.75%-4.0% range aims to curb inflation to its 2% target, with further increases likely this year. Richmond Fed President Thomas Barkin expressed a hawkish stance, stating that economic conditions are firming and warning that high inflation could affect future inflation. The CME FedWatch Tool estimates a 53% probability of an October rate hike.
In the Middle East, US President Donald Trump reported a productive meeting with Iranian representatives in New York, discussing the Strait of Hormuz, asset release, and ending the war in "resistance" fronts. WTI Oil prices were near a two-week low of $89.50, still well above pre-war levels, and diplomacy efforts had yet to yield significant progress.
This scenario kept inflation concerns alive, maintaining elevated US Treasury yields, with the 2-year yield around 4.77%, similar to levels seen in 2024. The combination of a strong US Dollar, rising yields, and expectations of higher borrowing costs placed Gold at risk for additional declines. Technical analysis showed XAU/USD under bearish pressure, trading under the Bollinger Bands' 20-period SMA at $4,350 and the upper band at $4,395.
Support could be found at the lower band at $4,304, with $4,250 as a potential deeper support level in case of a breach.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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