Mumbai, October 29, 2025 – The Indian rupee closed slightly higher on Wednesday, supported by potential central bank intervention, as traders closely monitored the upcoming U.S. Federal Reserve policy announcement. The modest recovery comes amid month-end dollar demand and a backdrop of mixed sentiment in Asian currency markets.

The rupee dipped to 88.3450 earlier in the trading session but rebounded to close at 88.1950, reflecting intervention efforts by the Reserve Bank of India (RBI) to stabilize the domestic currency. Market participants noted that this support helped counter the pressure from strong dollar bids at the end of the month.

Asian Currency Trends and Trade Negotiations

Regional currencies were mixed on Wednesday. The offshore Chinese yuan hovered near a one-month high, fueled by optimism over a potential U.S.-China trade agreement. Similarly, India has been engaged in bilateral trade discussions with the United States, signaling possible positive developments for exports.

A senior RBI official emphasized that the rupee’s exchange rate is market-determined, and is not being used as a policy instrument to counter tariffs. Analysts noted that a weaker currency could mitigate the impact of trade levies by making Indian exports more competitive globally.

Rupee Performance and Forward Premiums

The rupee has declined approximately 3% year-to-date, touching a record low of 88.80 last month. Traders are also watching dollar-rupee forward premiums, which were modestly lower, with the 1-year implied yield falling 2 basis points to 2.24%.

According to a Mumbai-based bank trader, state-run bank buy/sell swaps and market expectations of a dovish Federal Reserve are likely to keep forward premiums in check over the near term.

Focus on Federal Reserve Policy

Market attention is squarely on a widely anticipated Fed rate cut later in the day. Investors are seeking guidance from Federal Reserve Chair Jerome Powell regarding interest rate adjustments and any potential changes to the central bank’s quantitative tightening policy.

MUFG analysts noted that, given the absence of recent jobs data, Powell is expected to maintain a balanced stance, avoiding sudden shifts in market expectations that could be contradicted by upcoming employment statistics.

The dollar index was last recorded at 98.8, up 0.2% on Wednesday, reflecting continued strength in the greenback and its impact on emerging market currencies like the rupee.

Outlook for Indian Investors

While the rupee shows signs of stabilization, analysts stress that external factors, including U.S. monetary policy, trade negotiations, and global market sentiment, will continue to influence its trajectory. Investors and exporters are advised to monitor both domestic and international developments, particularly with the Fed’s policy announcement imminent.