On Monday, the Indian rupee and other currencies across Asia gained ground as the US dollar faced pressure, notably influenced by President Trump’s criticism of Federal Reserve Chair Jerome Powell, which raised alarms about the autonomy of the central bank.
During early trading, the rupee peaked at 85.0525 (Dh23.1750) before retreating slightly to settle at 85.1125 (Dh23.1914), reflecting a 0.3 percent increase for the day.
Traders indicated that the Reserve Bank of India (RBI) might take action, while one mentioned that dollar purchases could be initiated on behalf of importer clients.
Moreover, the ongoing weakness of the dollar has led to a more favorable outlook for Asian currencies among investors. This change in perspective is also evident in the declining costs associated with hedging against rupee depreciation.
The one-month dollar-rupee forward premium has fallen to a year-to-date low of 15.50 paisa, with one-month points in the non-deliverable forwards market approaching their lows from 2025.
Meanwhile, the dollar index reached an over three-year low of 98.2 as confidence in the US economy wavered, exacerbated by Trump’s intentions to revamp the Federal Reserve.
A White House advisor noted on Friday that Trump is considering whether to dismiss Chair Powell.
While MUFG Bank commented that outright removal of the Fed Chair by the Trump administration seems unlikely due to legal constraints, any actions in this regard are expected to cause significant market fluctuations, including in foreign exchange.
Most Asian currencies experienced gains, with the Thai baht leading the charge with an increase of nearly 0.7 percent.