The Indian rupee weakened slightly on Tuesday amidst a decline in its Asian peers, although its losses were limited by mild dollar sales by state-run banks. The rupee was at 83.9325 (Dh22.8698) as of 10.10am IST, against a close of 83.90 (Dh22.8610) in the previous session. Month-end dollar bids from importers initially weighed on the rupee, but state-run banks were seen offering dollars, mitigating the impact.
State-run banks did not seem to be acting on the behalf of the Reserve Bank of India (RBI) on Tuesday, even though current levels fall within the central bank’s zone to offer dollars. The RBI has been intervening routinely this month to prevent the rupee from dropping below the 84 handle, with the currency hitting a record low of 83.9725 (Dh22.8807) on August 7. The dollar index remained relatively stable at 100.8, while Asian currencies experienced declines ranging from 0.1 to 0.4 per cent.
The rupee is expected to trade within a range of 83.80-83.95 intraday, with sideways price action, according to FX advisory firm IFA Global. Additionally, dollar-rupee forward premiums decreased from multi-month highs in the previous session due to an increase in US bond yields. The 1-year implied yield dropped 2 basis points (bps) to 2.10 per cent, while the 1-year Treasury yield rose by 5 bps to 4.46 per cent in Asia trading.
Investors are closely monitoring Federal Reserve Chair Jerome Powell’s indication that the US central bank will begin cutting rates next month, with speculation surrounding whether it will be a 25 bps or a 50 bps cut. Currently, investors have priced in nearly 100 bps of rate cuts over the Fed’s next three meetings in 2024, anticipating a 50 bps cut at one of the meetings. The market awaits the Fed’s decision on the extent of rate cuts and its impact on the global currency market.
