MUMBAI, Sept 16 (Reuters) - The Indian rupee slipped to its lowest since late July on Wednesday as strong dollar demand from local companies and expectations of a U.S. Federal Reserve rate hike later in the day weighed on the currency.
Oil prices eased modestly but remained north of $100 per barrel with likely central bank intervention helping the South Asian unit withstand pressure from multiple directions.
The rupee closed flat at 95.9550 per dollar after touching a low of 95.9750 per dollar, its weakest level since July 27.
Persistent interventions by the Reserve Bank of India have helped the rupee hold above the 96 per dollar mark over recent sessions.
Regional currencies were mostly subdued with the U.S. dollar index near multi-week peaks ahead of a widely Fed rate hike.
Investors will parse the FOMC statement and Fed Chair Kevin Warsh's press conference for clues on whether the central bank will treat any rate hike as sufficient or signal further tightening ahead.
"A hawkish Fed outcome could increase pressure on the rupee and we have see the 96 level break if that happens," a trader at a foreign bank said.
Interest rate futures markets are pricing in a 92.5% probability of a 25-basis-points increase when the Fed announces its decision later today while swap markets have baked in about 60 bps worth of rate increases over the remainder of the year.
"We expect the FOMC to make only the minimum necessary change to its statement, which will likely note that it is hiking to return inflation to 2% but will likely avoid providing guidance on the path forward or the criteria for further hikes," analysts at Goldman Sachs said in a note.
Reporting by Jaspreet Kalra; Editing by Harikrishnan Nair and Nivedita Bhattacharjee
Source: Reuters