On Monday, the Indian rupee remained relatively unchanged, influenced by sustained dollar demand from importers, even as the dollar index reached its lowest level in over two months.
As of 10:40 a.m. IST, the rupee stood at 83.2675 against the U.S. dollar, barely moving from its previous session’s close at 83.27. Asian currencies, particularly the offshore Chinese yuan and the Indonesian rupiah, saw gains of over 0.5%. The dollar index fell to 103.6, marking its lowest level since early September.
The dollar’s weakening is attributed to market participants reassessing the likelihood of further tightening by the U.S. Federal Reserve following last week’s release of weaker-than-expected economic data.
While the rupee might experience marginal benefits from the softer dollar, traders anticipate it will remain within a narrow range. The rupee has held steady in the 82.70-83.40 range since early September.
Despite factors like a weaker dollar, lower oil prices, and inflows related to equities, the rupee’s significant appreciation depends on a reduction in local demand, as noted by a foreign exchange trader at a state-run bank. Anticipated initial public offerings (IPOs) worth around $900 million and MSCI index changes effective November 30, likely to draw $1.5 billion in inflows, are other factors influencing the currency.
“We continue to be in the frustrating range of 83-83.30. If 83.3 continues to resist, expect slippage to 83.19,” remarked Anand James, chief market strategist at Geojit Financial Services. Investors are now awaiting the minutes of the Fed’s October meeting, scheduled for Tuesday, for insights into the central bank’s future rate trajectory.