By Akhil Nallamuthub

Copyright thehindubusinessline

The rupee marked a record low of 88.46 last week against the dollar. However, since the beginning of this month, the movement in the exchange rate has largely been flat. On Tuesday, it closed at 88.06.

The greenback has been facing pressure of late. The US inflation data released last week shows that there has been an uptick in August. The US CPI inflation stood at 2.9 per cent versus 2.7 per cent in the preceding two months.

Likewise, the inflation on the domestic front also saw an uptick. India’s CPI inflation for August was recorded at 2.07 per cent versus the preceding month’s 1.61 per cent.

That said, , the expectation of a 25-basis point rate cut by the Federal Reserve in this week’s meeting (on September 17) has been weighing on the dollar. All eyes are now on the Fed’s interest decision, and this can possibly drive the USDINR exchange rate going forward.

The chart shows a consolidation in the rupee-dollar exchange rate whereas the dollar index shows weakness. Here’s an analysis.

Although the rupee hit a low of 88.46 last week, the price action since the beginning of September shows a sideways trend. The local currency has been oscillating within 87.90 and 88.46. The path of the next leg of short-term trend depends on the direction of the breach of the 87.90-88.46 price band.

A rally past 87.90 can lift the rupee to 87.70, a potential hurdle. A breakout of this can take it to 87.50. On the other hand, if the Indian currency falls from the current level and slips below the prior low and breaches the potential support at 88.50, it can extend the decline to 88.75.

The dollar index clearly shows a bearish bias, especially after falling below the support at 97.60. Currently hovering around 97, the price action hints at a further fall. The nearest support from the current level is at 96.50. A breach of this can drag it to 96.

Overall, while the rupee’s chart is now denoting a sideways trend. On the other hand, the chart of the dollar index shows that the greenback can depreciate further from the current level. This can possibly aid the rupee to recover in a short term. Nevertheless, watch the Fed’s decision closely because any deviation from the largely expected 25-basis rate cut can trigger higher volatility.

The potential fall in the dollar can lift the rupee in the near-term. The chart indicates an uptick to 87.70 and possibly to 87.50 over the next couple of weeks.

Published on September 16, 2025