The Indian rupee started Thursday’s session on a weaker note, slipping 16 paise to 94.69 against the U.S. dollar compared with the previous close of 94.53, as investors reacted to a hawkish stance from the U.S. Federal Reserve.

The decline came after the Federal Reserve kept its benchmark interest rate unchanged at 3.5%-3.75% at its latest policy meeting, extending the pause that has been in place since late 2025. The decision, which marked the first meeting chaired by Fed Chair Kevin Warsh, was widely anticipated, but the central bank’s projections revived expectations of further rate increases later this year.

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The prospect of higher U.S. borrowing costs supported the dollar and weighed on emerging market currencies, including the rupee.

Dollar Strength Pressures Asian Currencies

Most Asian currencies traded lower against the greenback amid cautious sentiment and rising expectations of additional tightening by the U.S. central bank.

The South Korean won posted the sharpest decline, falling 0.61%, followed by the Malaysian ringgit, which lost 0.58%. The Philippine peso weakened 0.34%, while the Indonesian rupiah and Taiwan dollar slipped 0.21% and 0.16%, respectively.

The Chinese renminbi and Japanese yen were relatively steady, slipping 0.06% and 0.02%. Only the Thai baht and Singapore dollar were able to notch gains among the major regional currencies, edging 0.05% and 0.03% higher respectively.

The dollar index, which tracks the U.S. currency against six major peers, stood at 100.31. In the previous session, it had climbed 0.85%, recording its strongest single-day gain since March 2 and touching its highest level since March 31.

Major Currencies Recover From Recent Lows

The euro traded at $1.1511, recovering slightly after touching a two-month low earlier. Sterling also edged higher to $1.3318 after hitting similar lows.

Commodity-linked currencies showed modest gains. The Australian dollar rose around 0.2% to $0.7025, while the New Zealand dollar advanced by a similar margin to $0.5780.

Market Participants Watch Key Levels

According to Finrex, higher dollar levels around 94.80-95.00 could encourage exporters to hedge their receivables, while importers may prefer to wait for lower levels around 94.35-94.40 before increasing purchases.

The rupee’s movement in the near term is expected to remain closely tied to the trajectory of the U.S. dollar, global interest rate expectations and capital flows. With markets pricing in the possibility of further tightening by the Federal Reserve, currency traders will also monitor economic data and signals from major central banks for additional direction.