Rupee hits near three-week low as Asian FX slides on Fed, war caution

The rupee fell to 95.24 against the dollar on Monday, its weakest in nearly three weeks, as a broad selloff in Asian currencies gathered pace. The move came after the Federal Reserve signalled it was in no rush to cut rates and as caution over a potential escalation in the Iran conflict pushed traders toward the dollar.

Asian peers from the Thai baht to the South Korean won lost ground in the session. The dollar index held near 104.50, supported by the hawkish tone from Fed Chair Jerome Powell's latest remarks. Powell said Friday that the central bank needed "greater confidence" inflation was on a sustained path toward 2% before easing policy, effectively ruling out a rate cut at the next meeting.

For the rupee, the pressure was compounded by month-end dollar demand from importers and oil companies, who typically step up hedging around this time. Brent crude rose 1.2% to $85.70 a barrel on the Iran headlines, adding to India's import bill and weighing on the currency.

The Reserve Bank of India was seen intervening through state-run banks in the spot market, traders said, selling dollars near the 95.25 level to slow the rupee's slide. The central bank has historically defended the 95 mark, though it has allowed gradual depreciation over the past year as the dollar strengthened globally.

On the domestic side, the rupee's decline comes ahead of key data this week. India's GDP print for the December quarter is due Friday, with economists polled by Reuters expecting growth of 6.4% year-on-year. A miss would add to pressure on the currency by raising bets on a rate cut from the RBI.

The rupee has lost roughly 2.5% against the dollar so far this year, tracking the broader weakness in emerging-market currencies. The next support level for USD/INR is at 95.50, with resistance at 94.80, traders said.

For traders watching the pair, the near-term direction hinges on the Fed's next move and the trajectory of oil prices. The RBI's willingness to defend the 95.50 level will be tested if dollar demand persists through the week.

Among Indian stocks, HDFC Bank shares were little changed on the session, while Infosys and Wipro both edged lower in line with the broader market. The Nifty 50 fell 0.3%.

The RBI's next monetary policy meeting is scheduled for April 8-9. Markets are pricing in a 25-basis-point rate cut, though the rupee's weakness could give the central bank reason to hold steady.