The rupee of India almost did sidewise on Wednesday, while the Reserve Bank of India took a measure to cap down the dramatic devaluation and hence provided support to the currency. Closing at 83.5175, a marginal difference from the previous session’s 83.5075, the rupee traded within a narrow range of 83.4950 to 83.5175 throughout the day.
The appreciation of currency traders was that this pressure has been manifested by increased demand for the US dollar by local corporations and oil companies in recent days. The market frequently has this habit of speculating about RBI intervening when state-run banks offer to sell the dollar, but some traders have concluded that the market has also not been very strong, and expectations of central bank intervention have proved effective in holding the rupee.
In the face of the strong demand for the dollar, and not long speculative activities to drive the rupee down have been affected. Thus, the current remains in a relatively tight range, according to a foreign exchange trader at a foreign bank.
In tandem with these developments, dollar-rupee forward premiums experienced a slight uptick, with the 1-year implied yield rising by 2 basis points to 1.70%, marking its highest level in almost two weeks. Meanwhile, the dollar index edged up by 0.1% to 105.5, while Asian currencies saw declines ranging from 0.1% to 0.4%.
Due to the absence of important U. S. economic indicators, which are expected to be out this week, investors are focusing their attention on the utterances of the Federal Reserve officials to gain any hint on the possible timing for the policy rate adjustments. As of now, investors assume that for 2024, there are two rate cuts.
The level of the rupee has been stable relative to currencies of other countries, and expectations among market players view that the foreign exchange market is cautious, and development in economic affairs abroad and the central bank’s actions are closely gauged for the direction.
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