Rupee May Not Recover Even With US Rate Cut
Analysts expect little relief for the Indian rupee even if the US Federal Reserve announces a 25 basis-point rate cut this week. The currency has been under pressure in recent months due to weak foreign inflows, a wide trade deficit and concerns over global demand.
Fed Move May Have Limited Impact
Normally, a rate cut in the United States leads to a softer dollar and can support emerging market currencies. However, experts say India’s situation is influenced more by domestic factors. The rupee has already fallen despite the Reserve Bank of India reducing its repo rate by 25 basis points to 5.25 per cent earlier this week.
Traders said that global central bank moves alone will not be enough to lift the rupee unless capital flows and export performance improve.
Domestic Challenges Continue
India’s trade deficit remains high, foreign investment has slowed and oil import costs continue to weigh on the currency. Portfolio flows have been inconsistent, as investors remain cautious about global growth and geopolitical risks.
Market participants said the rupee could face further pressure if external demand weakens or if foreign investors continue shifting funds out of emerging markets.
Outlook Remains Weak
Economists believe that even if the Federal Reserve cuts rates, the rupee may only see short-lived support. The medium-term outlook depends more on India’s external balance, export momentum and investment flows than on global monetary policy alone.
The currency is expected to remain range-bound with a weaker bias until stronger inflows return.
