Rupee Weakens, Gold Prices Slip Ahead of US Fed Policy Announcement

The Indian rupee weakened on 10 December 2025 amid turbulent global capital flows and uncertainty surrounding the upcoming US Federal Reserve (Fed) policy decision, according to Reuters. Investors remain cautious as they anticipate signals on future interest-rate moves, which could influence emerging-market currencies and capital movements.

Rupee Trends and Influencing Factors

Capital Flows and Dollar Strength Drive Volatility

The rupee traded lower against the US dollar, reflecting risk-off sentiment in global markets. Analysts cite factors such as portfolio outflows, investor hedging activity, and uncertainty over US monetary policy as key drivers behind the depreciation. The Indian currency’s movement underscores its sensitivity to global macroeconomic trends, trade dynamics, and foreign investment flows.

A weaker rupee has implications for import costs, inflation, and the trade balance, particularly for an economy heavily reliant on commodity imports such as crude oil and gold.

Gold Prices Retreat Amid Profit Booking

Safe-Haven Demand Moderated Ahead of Fed Decision

Simultaneously, gold prices edged lower as investors booked profits following recent rallies. Market participants adopted a cautious stance ahead of the Fed’s interest-rate announcement, which often affects the appeal of non-yielding assets like bullion.

While gold remains a traditional safe-haven investment, expectations of stable or rising US interest rates generally reduce its attractiveness, prompting short-term price corrections. Analysts note that such fluctuations are common during periods of macroeconomic uncertainty and policy anticipation.

Implications for India

Trade, Inflation, and Market Sensitivity

For India, currency and commodity movements have direct economic consequences. A weaker rupee can increase the cost of imports, potentially affecting inflation and the current account deficit. Conversely, softening gold prices may provide some relief to consumers and businesses dependent on bullion, while impacting domestic gold-importers’ cost calculations.

Investors and policymakers closely monitor these trends, as they influence monetary policy decisions, foreign-exchange interventions, and market sentiment. The Reserve Bank of India (RBI) may adjust liquidity and hedging measures to mitigate excessive volatility in currency and commodity markets.

Outlook Ahead

Markets Await Fed Decision and Global Signals

As global investors await the Fed’s announcement, markets are expected to remain volatile, with currencies and commodities sensitive to policy guidance, economic data, and geopolitical developments. Analysts suggest that short-term caution may continue, while medium- to long-term fundamentals of the Indian economy remain resilient.