Indian Rupee Falls To 4-day Low Against U.S. Dollar

(RTTNews) - The Indian rupee weakened against the U.S. dollar in the late Asian session on Tuesday, amid importer hedging surpassed exporters and equity outflows acceleration.

Traders are cautious ahead of the Federal Reserve's policy announcement due on Wednesday. Markets will closely examine the Fed's announcement and Chair Jerome Powell's press conference for hints regarding the timing of future rate cuts, even if rates are anticipated to stay unchanged.

The U.S. administration's comments regarding potential tariff rollbacks caused the dollar to decline.

The U.S. may withdraw the 25 percent punitive tariffs placed on India in mid-2025 for purchasing Russian oil, according to statements made by U.S. Treasury Secretary Scott Bessent on the margins of the World Economic Forum in Davos last week, which stoked speculation about lessening trade tensions.

However, a possible free trade deal between India and the EU this week would operate as a countercyclical buffer by increasing exports of chemicals, textiles, and pharmaceuticals, as well as by enhancing regulatory clarity and drawing in foreign investment, thereby reducing the Rupee's negative risks.

Meanwhile, the market sentiment improved following India's decision to lower taxes on European Union (EU) car imports from as high as 110 percent to 40 percent.

In order to facilitate market access for automakers like Volkswagen, Mercedes-Benz, and BMW, the government of India has agreed to immediately reduce taxes on a number of automobiles priced above EUR 15,000, with rates scheduled to eventually drop to 10 percent.

Against the U.S. dollar, the rupee fell to a 4-day low of 91.87 from yesterday's closing value of 91.71.

If the rupee extends its downtrend, it is likely to find support around the 92.00 region.

Looking ahead, U.S. weekly ADP employment data, Canada wholesale sales data for December, U.S. Redbook report, U.S. S&P/Case-Shiller home price for November, U.S. Consumer Board's consumer confidence for January, U.S. Richmond Fed manufacturing index for January and U.S. Dallas Fed services index for January are slated for release in the New York session.