Indian Rupee's Steady Stance Against the US Dollar Amid RBI Policy Anticipation

The Indian Rupee commenced the trading day on a stable note against the US Dollar, maintaining a similar level as to where it had previously closed. This occurred on a Tuesday where the forex market's eyes are set on the Reserve Bank of India's (RBI) imminent policy decision later in the week.

Initiating the day's trade slightly down by a mere paise at Rs 83.38 to the dollar, the Rupee mirrored Monday's closing figure of Rs 83.37 with marginal fluctuation. By 9:11 a.m., the Rupee was observed trading at Rs 83.39 against the dollar, signifying a calm market demeanor.

Forex traders predict the RBI is likely to maintain its current policy, with no significant changes expected. Concurrently, the dollar index, which measures the US Dollar against a basket of other major currencies, witnessed a two-week peak driven by the euro's drop, subsequently impacting the Indian currency. The index edged up by 0.6% to a figure of 103.85, whereas the euro fell by 0.7% to 1.0804 versus the dollar.

Despite the disparity shown by the Indian equity market, where the Nifty index soared to unprecedented levels, the Rupee did not follow suit and is currently trading close to its lowest-ever value. Amit Pabari, managing director at CR Forex Advisors, points out that multiple factors, such as a significant five-year low in liquidity deficit minimizing RBI's dollar-selling interventions, are contributing to this situation.

Furthermore, consistent dollar demand by oil and gold importers, which contributes to an expanding trade deficit, is holding the Rupee within a confined range between Rs 83.00 to Rs 83.40. Pabari, however, notes that with a Fed rate cut appearing more likely, alongside expected strong capital inflows, a reduction in inflation to 4.87%, and a determined RBI, the Rupee may resist exceeding the Rs 83.45 threshold.

Rupee, Dollar, Forex