Dollar Steady Pre-Fed; Rupee Stays Under Pressure!

Traders entered a packed central-bank week with the U.S. dollar largely unchanged, awaiting Fed guidance that could set direction for major currencies. At the same time, the Indian rupee stayed constrained by trade/tariff headlines, softer portfolio flows and expectations around U.S. policy moves — keeping INR among the weaker Asian currencies.

Why the dollar is steady ahead of Fed week

With rate decisions and commentary due from the Federal Reserve, the Bank of Japan and the Bank of England, market participants pared big directional bets. The dollar index hovered near recent levels as investors awaited the Fed’s policy signal — particularly the dot plot and Fed Chair remarks — that will clarify the path for U.S. rates and real yields. Major pairs were relatively calm: the euro and sterling showed limited reaction, while the yen was sensitive to any BoJ messaging on yield control or policy tweaks.

Immediate drivers to watch

• Fed communications (dot plot, Powell remarks): will determine expectations for rate cuts or holds and influence dollar carry dynamics.
• BoJ and BoE statements: any surprise tone from Tokyo or London can amplify FX moves, especially JPY and GBP crosses.
• Risk headlines (e.g., credit or fiscal news): these can prompt safe-haven dollar flows or risk-driven reversals.

Rupee remains boxed in by tariffs and flows

The Indian rupee showed limited upside despite occasional demand, with traders citing lingering tariff concerns and an absence of strong portfolio inflows. Reports pointed to the rupee trading near fresh lows, and market participants see the Reserve Bank of India as likely to step in — directly or via state-owned banks — if depreciation accelerates.

What matters for INR in the near term

• Trade/tariff headlines: renewed tariff or trade policy uncertainty can prompt capital flight and weigh on the rupee.
• Portfolio flows: weak equity or bond inflows keep downside pressure; improvements could ease it.
• RBI intervention: verbal warnings, FX sales or other measures would limit sharp moves and signal readiness to defend the currency.

Bottom line: central-bank communications this week are the dominant theme for broad FX direction — the Fed in particular — while country-specific stories (tariffs, flows, and local central-bank intervention) continue to shape performance at the single-currency level. Traders should watch Fed releases for guidance on rate expectations and monitor India-specific headlines and RBI signals for short-term rupee behavior.

Quick levels to watch (indicative): dollar index support at recent mid-90s levels with resistance near last week’s highs; EUR/USD and GBP/USD likely to trade in ranges until clearer Fed/BoE signals emerge. For INR, watch the psychologically sensitive marks that have recently capped moves and any official communication from the RBI.