The Indian rupee weakened on Thursday despite gains in other Asian currencies, driven by the possibility of the Federal Reserve cutting policy rates later this year. The rupee was at 22.7329 against the UAE dirham, down from its previous close. The currency faced pressure following the national elections but partially recovered after intervention from the Reserve Bank of India. Traders anticipate continued intervention from the central bank against sharp declines in the rupee, although sustained outflows from the equity market may continue to impact the currency.
Foreign investors have sold over $2 billion worth of Indian equities in the last two trading sessions, putting pressure on the currency. Benchmark Indian equity indices, the BSE Sensex and Nifty 50, were up about 0.7% each in early trading. The range for the rupee is expected to be between 83 to 83.50, according to Anil Bhansali, head of treasury at Finrex Treasury Advisors. Dollar-rupee forward premiums increased with the 1-year implied yield up 2 basis points at 1.66% after US bond yields slipped, raising hopes of Fed rate cuts.
The dollar index fell 0.1% to 104.1, while most Asian currencies strengthened. Expectations of central bank intervention to limit rupee weakness may lead to natural offers to sell dollars near 83.50, according to a foreign exchange trader at a private bank. Investors are now waiting for the RBI’s monetary policy decision and the U.S. non-farm payrolls report, both scheduled for Friday.
In summary, the Indian rupee weakened despite gains in other Asian currencies, driven by expectations of Federal Reserve rate cuts. The currency faced pressure following the national elections but partially recovered after RBI intervention. Foreign outflows from Indian equities have put pressure on the rupee, with the central bank expected to intervene to limit declines. Investors are watching for the RBI’s monetary policy decision and the US non-farm payrolls report for further market direction.
