The Indian Rupee (INR) opened flat at around 94.95 against the US Dollar (USD) on Wednesday, maintaining proximity to its two-month high of 94.80 reached the previous day [1]. The currency is expected to face selling pressure as the US Dollar has strengthened, driven by increasing expectations that the Federal Reserve (Fed) will tighten monetary policy at its upcoming meeting this month [1]. The US Dollar Index (DXY) was trading 0.13% higher near 99.80, marking its highest level in over two weeks [1].
Strategists at Brown Brothers Harriman (BBH) noted that Fed funds futures now price in a 67% probability of a 25 basis point rate hike on September 16, with an implied 60 basis points of tightening over the next twelve months [1]. This hawkish shift is attributed to rising global inflation projections, fueled by surging oil prices amid ongoing tensions between the United States and Iran, which have disrupted energy supply routes [1]. According to Kpler’s data, only five vessels passed through the Strait of Hormuz, significantly below the 10-day average of about 14 vessels, as ship sailors avoid the route due to security concerns [1].
US President Donald Trump stated that Washington is striking Iranian targets near the Strait of Hormuz in retaliation for Iran’s 'failed attempt' to add sea mines in the area, and confirmed that the US base in Jordan successfully intercepted all eight missiles launched by Tehran [1].
Financial markets are awaiting the US Nonfarm Payrolls (NFP) data for August, set to be released on Friday, which is expected to significantly impact the Fed’s interest rate outlook [1]. In the interim, investors are focusing on the US ADP Employment Change data for August, with estimates suggesting the US private sector created 48,000 new jobs, up from 44,000 in July [1].
On the domestic front, strategists at Standard Chartered have raised their outlook for India’s economy, revising their FY27 (year ending March 2027) GDP growth forecast to 7.2% from 6.6% [1]. This upgrade is based on stronger-than-expected Q1-FY27 GDP growth of 7.8%, compared to the consensus estimate of 7.3%, and continued economic momentum in July [1].
CONCLUSION
The Indian Rupee remains near a two-month high but faces potential downside as US rate hike expectations strengthen and global energy tensions persist. However, India’s upgraded growth outlook and robust recent GDP data provide a positive counterbalance. Market participants are closely watching upcoming US employment data for further direction.