Finance
The Indian rupee fell on Monday, setting up a monthly decrease on the back of a central bank that does not appear to want the currency to rise much. By 11:02 IST, the rupee was trading at 82.2625 to the dollar, down from 82.2475 on Friday. In July, the local currency fell 0.3%.
The rupee has hit the 81.70-81.75 level twice this month, forcing it to battle with the Reserve Bank of India (RBI). According to dealers, the central bank purchased dollars at that level through public sector banks to prevent the currency from strengthening further. The RBI’s decision was offset by more than $5.5 billion in foreign equities inflows and a weaker dollar index.
Because the RBI is “not in the mood to relent,” the rupee appears to be limited to an 81.70-82.50 range for the time being. The dollar index fell 1% in July on predictions that the US Federal Reserve’s rate cycle had ended. Investors are betting that this month’s Fed rate hike will be the last due to lower US inflation data.
“We suspect that further signs of a significant easing in the monthly core CPI (consumer price index) numbers for July and August will ultimately persuade the Fed to hold fire for the remainder of this year particularly,” Capital Economics said in a note last week. A rise in oil prices was cited another reason for the rupee’s fall this month. Brent crude futures, up about 12.5% this month, are headed for their best performance in more than a year. USD/INR forward premiums barely changed month-on-month, with the 1-year implied yield at 1.66% amid possible sell/buy swaps by the RBI and a dovish Fed outlook.
Source:FE
