Indian Rupee Holds Firm, But Hawkish Fed Bets Loom

The Indian Rupee has maintained its two-month high against the US Dollar, but is expected to face selling pressure in the coming days. The US Dollar Index (DXY) has strengthened due to increasing expectations that the Federal Reserve will tighten its monetary policy at its upcoming meeting.

Rising global inflation projections and continuously surging oil prices have boosted Fed interest rate hike expectations, with 67% odds of a 25bps hike on September 16. This hawkish stance could act as a headwind for the Indian currency.

However, India's growth outlook has improved due to strong festive demand, with strategists at Standard Chartered revising their FY27 GDP growth forecast to 7.2% from 6.6%. They expect momentum to remain supportive into the festival season.