Finance
On Tuesday, the Indian rupee ended a three-day winning streak as the Reserve Bank of India (RBI) likely intervened through dollar purchases, while importer hedging added to the pressure.
The rupee closed at 81.8700 versus the dollar, up from 81.8150 at the previous closing.
Three traders told Reuters that the RBI likely bought dollars and executed sell/buy swaps through public sector banks after the rupee touched a more-than-two-month high of 81.6750 in the session.
The one-year dollar-rupee implied rate increased four basis points to 1.73%, as the RBI considered intervening in the futures market.
“The rupee’s momentum is currently driven by the RBI,” said Amit Pabari, managing director at CR Forex. “Even otherwise, factors like robust equity inflows, a weak dollar, and a relatively stronger Chinese yuan currently favour the rupee’s appreciation.”
According to the National Securities Depository, foreign investors have purchased more than $5 billion in Indian equities so far this month, boosting the rupee’s strength.
Aside from dollar inflows, advances in the Chinese yuan have also contributed to the rupee’s recent surge.
The yuan rose 0.6% to 7.14 per dollar as China’s senior leaders committed to increase policy support for the country’s faltering economic recovery.
Investors are looking for indications from the United States Federal Reserve’s policy decision, which is scheduled for late Wednesday and includes a 25 basis point rate hike.
Investors will be looking for comments on the outlook for future rate hikes.
DBS Bank stated in a note that any hint from the Fed that this cycle’s terminal rate has been reached would be market beneficial.
“The overall signal from the central bank would be that the next time it makes a move, perhaps in mid-2024, it would be an easing measure,” it added.
Source:BS
