The Indian Rupee opened lower on May 26, snapping three-day winning streak as fresh U.S. strikes in the Middle East dent optimism over an imminent peace deal with Iran, with traders also expecting month-end flows to weigh.
Indian rupee opened lower by 16 paise at 95.39 per dollar on Tuesday against previous close of 95.23.
According to Finrex, the dollar has remained under pressure against the rupee despite weakness across most Asian currencies, primarily due to the RBI’s active intervention through dollar sales aimed at preventing a sharper fall in the Indian currency. The rupee had become one of the worst-performing Asian currencies over the past two years, depreciating nearly 15 percent, even as the Chinese yuan strengthened and the dollar index declined sharply from 114 to around 99 levels.
The brokerage noted that aggressive RBI intervention has significantly reduced speculative pressure on the rupee. Additionally, improving risk appetite in domestic equity markets has supported the Indian currency and helped it remain relatively stable against the dollar.
However, Finrex believes the broader outlook for the rupee continues to remain weak amid expectations of a wider current account deficit (CAD) this year, driven by elevated crude oil prices, higher imports, and the RBI’s outstanding short dollar positions.
In the near term, exporters are expected to continue selling dollars on any rise in the greenback to hedge their receivables, while importers may utilise dips in the dollar to hedge import payments for the next one to two months, the report added.
The dollar nursed losses on Tuesday on rising investor optimism of a deal being struck to reopen the crucial Strait of Hormuz and end the three-month-long Iran war, although fresh U.S. attacks on Iranian targets weighed on sentiment.
Asian currencies traded mixed against the US dollar in the latest session. The Taiwan Dollar emerged as the strongest performer, gaining 0.449 percent, followed by the Philippine Peso and China’s Renminbi, rising 0.219 percent and 0.209 percent, respectively, while the South Korean Won posted a mild gain of 0.093 percent. Singapore Dollar remained largely flat with a marginal increase of 0.008 percent.
On the weaker side, the Thai Baht declined 0.172 percent, followed by the Indonesian Rupiah, which slipped 0.152 percent. The Malaysian Ringgit also weakened by 0.121 percent, while the Japanese Yen edged down 0.044 percent against the dollar.
