The Indian rupee falls to a two-week low on the Fed’s aggressive outflows

The Indian rupee fell to its lowest level in two weeks on Thursday as the outflows compounded the blow of an hawkish stance in Federal Reserve policy that pushed dollar and U.S. Treasury yields higher.

The rupee closed at 88.6950 against the US dollar, down 0.6% on the day after hitting a two-week low of 88.7375 earlier in the session.

India’s central bank likely intervened intermittently, through state-owned banks, to limit the rupee’s losses, but the intervention was not aggressive, traders said.

“Many stop losses have been triggered in the 88.40 to 88.50 zone, leading to new highs in USD/INR,” said a trader at a state-owned bank.

Asian currencies fell between 0.1% and 0.5% after Federal Reserve Chairman Jerome Powell indicated October’s cut could be the last before 2025.

Despite the guidance, money markets are currently pricing in a 68% chance of a 25 basis point rate cut in December, according to CME’s FedWatch tool. “Regardless of the overnight shock from Chairman Powell, we think the hurdle of not cutting in December is very high,” DBS analysts said in a note. “Cutting rates has been easy so far; the decision to cut rates much more will be fraught with difficulties,” she added.

The dollar index was steady in Asian trading after rising 0.4% in the previous session. The 2-year U.S. Treasury yield stood at 3.598%, after rising 9 basis points on Wednesday.

Elsewhere, US President Donald Trump said the US will cut tariffs on China to 47% from 57% previously after meeting his Chinese counterpart, Xi Jinping, in South Korea.