After 4 days of gains, rupee closes 32 paise lower at 88.13

Mumbai: The Indian rupee reversed four consecutive days of gains Thursday, tracking weakness in Asian currencies, as investors assessed the interest-rate trajectory in the US following the Federal Reserve's latest decision and commentary on policy rates.

The local currency closed 32 paise lower at 88.13 per dollar, compared with the previous close of 87.8150/1$.

The rupee had gained amid broad weakness in the dollar in anticipation of a rate cut by the US Fed. The local currency advanced above the 87-mark on Wednesday for the first time in almost three weeks.


Late Wednesday, the US Fed cut interest rates, moving its benchmark rate 25 bps lower to 4.00-4.25%, in line with market expectations. However, the forward guidance was mixed, with Fed Chair Jerome Powell saying decisions would be made "meeting by meeting."

Immediately after the rate announcement, the dollar weakened further but rebounded after Powell signalled caution and the so-called "dot plot" indicated only 1 rate cut in 2026, currency dealers said.

"Dollar weakness is expected to persist as the rate cut cycle in 2026 could be deeper than the single rate cut projected. The impact of tariffs on growth and inflation will become more visible as companies pass the higher costs to the consumer. This combined with weakening job market poses downside risk to consumer demand," said Gaura Sen Gupta, chief economist at IDFC First Bank.

Back home, investors' attention is back to US tariff woes and weak foreign inflows in the equity market, which has been a major drag on the rupee.

On Thursday, Chief Economic Advisor V Anantha Nageswaran expressed confidence that the tariff dispute between India and the US may be resolved within the next two months with the penal tariffs likely to be withdrawn. He also indicated that talks are underway to reduce the reciprocal tariff from 25% to about 15%, sparking optimism for exporters.