The Indian rupee remained steady against the US dollar on Friday due to dollar demand from oil companies and cautious sentiment in the equities market. The currency was trading at 83.4850 against the dollar, slightly unchanged from the previous closing rate. Traders believe that the Reserve Bank of India’s interventions will prevent significant fluctuations in the rupee.
The upcoming general election results on June 4 have created nervousness in the equity market, causing some pressure on the Indian rupee. Foreign investors have withdrawn around $2 billion from Indian equities in May amidst concerns over the election outcome. Despite this, benchmark Indian equity indices, the BSE Sensex and Nifty 50, showed slight gains after a decline in the previous session.
MUFG Bank noted that there might be slight weakness in the Indian rupee and risk assets if the ruling party, BJP, loses some seats in the election. Conversely, if the party wins a greater seat share, it could lead to a positive market reaction with the INR FX and risk assets likely to rally. The dollar index also saw a decline on Thursday, and most Asian currencies remained rangebound as US jobless claims rose, indicating softness in the labor market.
US bond yields also dipped as the market’s expectation of a September rate cut by the Federal Reserve increased to 67 percent. This was up from 62 percent a week earlier, according to CME’s FedWatch tool. Overall, the Indian rupee’s stability against the US dollar is expected to continue, with the central bank’s interventions helping to prevent any sharp declines. Traders will closely monitor the general election results for any potential impact on the currency.