Lower Fed hike odds, oil dip lend RBI hand in supporting rupee

The rupee appeared to face a less challenging environment on Wednesday, following a decline in expectations of a US rate hike and softer oil prices. Traders anticipate the rupee to open at 95.94-95.99 per dollar, up from Tuesday's closing rate of 95.98. The currency had slipped to a two-month low of 96.1475 before recovering due to potential intervention from the Reserve Bank of India (RBI).

Over recent weeks, the rupee has frequently required RBI intervention to ease its decline, with factors such as high oil prices, rising US Treasury yields, weak foreign portfolio flows, and increased hedging demand contributing to the pressure. The RBI has been employing its growing foreign exchange reserves to prevent external pressures from exacerbating the currency's weakness.

RBI's commitment to keeping the rupee stable around the 96-per-dollar mark is becoming more apparent, providing a support level as pressure mounts, according to Amit Pabari, managing director at FX advisory firm CR Forex. The odds of another Federal Reserve rate hike in the following month have decreased to 44% from nearly 70%, reflecting a more cautious tone from policymakers and softer US economic data.

US consumer confidence plummeted to its lowest level in over a decade in September, while New York Fed President John Williams stated there was "no urgency" for another rate increase following the September hike. Williams emphasized that the central bank has time to evaluate incoming data before deciding on its subsequent move. Meanwhile, oil prices experienced a decline of approximately 2.5% on Tuesday, attributed to indications of a recovery in Middle East exports.