Rupee ends lower at 81.99 on possible importer demand; Fed policy in focus

Rupee weakened on Wednesday as importers bought Dollars ahead of the month-end, while investors also covered short-Dollar positions ahead of the US Federal Reserve's policy outcome due later in the day.

The Rupee ended at 81.99 against the Dollar, compared to its previous close of 81.87.

On Tuesday, the Rupee touched 81.66, its highest since early May, but Dollar buying intervention from the Reserve Bank of India (RBI) pushed it back.

RBI's persistent intervention has helped the foreign exchange reserves climb back above $600 billion.

"Markets are more vulnerable for any hawkish surprise from FOMC than dovish guidance," said Arnob Biswas, FX research head at SMC Global.

Chances of another rate increase in November have grown to about 34 per cent, versus 26 per cent a week ago, according to the CME's FedWatch tool.

Asian currencies were mixed before a certain Fed rate hike later in the day, which investors bet will likely be the last for the current rate hike cycle, mainly driven by a fall in the US inflation.

Dollar index

The Dollar index fell 0.2 per cent to 101.13 ahead of the Fed outcome but has recovered from a 15-month trough of 99.54 hit a week ago.

"It looks far too early for the central bank to soften up its FOMC statement by embracing recent disinflationary trends. This should see the Dollar holding onto some of its modest gains made over the last week," ING analysts said in a note.