Rupee Bounces Off Two-Month Lows Amid Fed Tightening Expectations

The Indian Rupee (INR) has stabilized near its two-month low of 94.80 against the US Dollar (USD), trading around 94.90 as of Wednesday. Despite a relatively stable performance, the currency remains vulnerable due to increasing expectations of an aggressive policy stance from the Federal Reserve at its upcoming meeting.

The stronger US Dollar backdrop is seen as a potential drag on the Rupee in the near term. According to Brown Brothers Harriman, Fed funds futures now price a 67% probability of a 25 bps rate hike on September 16 and imply 60 bps of tightening over the next twelve months.

In related news, Standard Chartered has upgraded its India FY27 GDP growth forecast to 7.2% from 6.6%, citing stronger-than-expected data and supportive festive-season demand. However, the Rupee's stability near recent lows suggests that investors remain cautious about the currency's prospects.