The Indian rupee recorded its largest single-day gain in nearly a month on Wednesday, driven by expectations that the Federal Reserve will resume its rate-cutting cycle, along with positive sentiment surrounding ongoing trade tariff negotiations between India and the United States.
The currency strengthened by approximately 24 paise, closing at 87.8150 per US Dollar (USD), compared to the previous close of 88.05. During the trading session, it peaked at 87.71 per USD. This recent improvement follows the rupee reaching an all-time closing low of 88.4425 on September 11. Over the past four trading sessions, the Indian rupee has appreciated by a total of about 63 paise.
Market expectations suggest that the Federal Reserve may implement at least a 25 basis points rate cut, fueled by August’s job data indicating a slowdown, even as inflation has slightly increased. A rate cut from the Fed could lead to a weaker dollar, thereby strengthening other global currencies.
Amit Pabari, Managing Director of CR Forex Advisors, noted the rupee’s gains are partly due to dollar weakness anticipated from a potential rate cut by the US Fed, combined with a stronger Chinese yuan against the greenback. He stated, “The dollar’s weakness against other currencies and the expectation of a positive outcome from the ongoing India-US trade tariff negotiations is having a salubrious effect on the rupee.”
Dipti Chitale, CEO of Mecklai Financial Services, highlighted the rupee’s strong opening at 87.83. It further strengthened to about 87.71 during the day, attributing this increase to a significant drop in the Dollar Index (DXY) and US treasury yields, which have bolstered the rupee’s position.
Chitale pointed out that the Federal Reserve is historically responsive to the job market. Signs of a weakening labor market, seen in an unemployment rate increase to 4.3 percent, have raised expectations for three rate cuts by the end of the year. Additionally, market participants anticipate five rate cuts over the next 12 months. She added, “If this trajectory continues, then we can expect DXY to remain weak. The expectation of a positive outcome from India-US trade talks could also provide some support to the rupee.”
Madan Sabnavis, Chief Economist at Bank of Baroda, noted that the rupee’s recent appreciation over the past two days is largely due to renewed dialogue between the US and India, which has instilled market confidence. He also remarked that the dollar is likely to weaken further once the Fed announces a rate cut later today.
The article was published on September 17, 2025.
