By Siddhi Nayak
MUMBAI (Reuters) – The Indian rupee closed lower on Monday, pressured by weakness in Asian currencies and dollar purchases by state-run banks.
The rupee settled at 82.9050 to the U.S. dollar compared with 82.8775 in the previous session. The local unit traded in a 82.83 to 82.9150 band in Monday’s session.
“Inflows have been supportive, but dollar purchases from state-run banks have limited the rupee’s rally,” a trader with a private bank said. “It is difficult to determine whether these dollar purchases were on behalf of importers or the central bank.”
The Reserve Bank of India (RBI) has been absorbing dollars in the spot market amid persistent foreign inflows in the country’s debt and equity markets, traders said.
That has capped gains in the rupee over the last few trading sessions.
“This (RBI) intervention is likely to continue, further contributing to the stability of the rupee against the dollar,” Jateen Trivedi, vice president and research analyst at LKP Securities, said.
“We expect the rupee to trade sideways in the range of 82.70 and 83.20 going into the Federal Reserve’s policy.”
Asian currencies were mostly lower ahead of the policy outcome from two major central banks this week.
The Bank of Japan’s policy decision is due on Tuesday and the central bank is believed to be on the brink of ending its negative rates regime.
Meanwhile, in the Fed’s review on Wednesday, investors will assess if policymakers change their projections for rate cuts for the year.
The Fed in December projected 75 basis points of easing in 2024.
“The short-term reaction in the dollar should be primarily driven by projections on rates and other macro indicators,” ING Bank said in a note.
“We expect an unchanged dot plot but admit that a hawkish revision looks more likely than a dovish one.”
(Reporting by Siddhi Nayak; Editing by Mrigank Dhaniwala)
