The rupee remains flat against the dollar
The Indian rupee traded nearly flat on Tuesday, with traders anticipating little movement as the Reserve Bank of India (RBI) continued to control large falls and reduce short-term volatility. At 09:50 a.m. IST, the rupee was valued at 83.4975 per US dollar, up slightly from its previous closing of 83.5050.
RBI’s strategic interventions
On Monday, the rupee remained in a restricted trading range, most likely due to RBI interventions that limited the currency’s decline. The central bank’s initiatives have helped to reduce the near-term volatility of the dollar-rupee exchange rate. The one-month implied volatility has declined to 2.20 per cent, down from a six-month high of 3.35 per cent in late May, shortly before India’s national election results on June 4.
Stable exchange rates expected
Traders anticipate the rupee will not go “much below 83.50,” as continued dollar sales from state-run banks, presumably on behalf of the RBI, sustain the currency. The dollar index stood at 105.1, while most Asian currencies fell ahead of the announcement of US inflation data and the Federal Reserve’s policy decision, which is due on Wednesday.
Market awaits Federal Reserve’s policy decision
The Federal Reserve is widely expected to maintain policy rates steady. Investors will, however, closely scrutinize Fed Chair Jerome Powell’s words as well as any modifications to the interest rate dot plot. Interest rate futures are now pricing in around 38 basis points of rate reduction through 2024, down from nearly 50 basis points the previous week.
Anil Bhansali, head of treasury at Finrex Treasury Advisors, said that the rupee’s price action will mirror Monday’s, with market participants keeping a close eye on the RBI’s activities and the 83.50 level.
(With inputs from Agencies)
