The Indian rupee is anticipated to open with minimal changes on Friday, reflecting a cautious stance amid contrasting factors. The currency remains within a narrow range due to likely dollar purchases by the central bank and simultaneous inflows. Non-deliverable forwards project a modest opening around the previous session’s 82.9125 mark.
This week has witnessed the rupee’s trading range shrinking further, reflecting a delicate balance influenced by central bank activities and external fund inflows. An FX trader at a bank remarked on the compressed range, emphasizing the limited impact of India’s robust GDP growth and U.S. inflation figures on the rupee’s perspective.
India’s economy surpassed expectations, achieving its fastest growth in a year and a half during the December quarter. This positive performance supports the medium-term optimism surrounding the rupee. However, the currency’s movements are also influenced by the dollar index, which experienced an upswing amid a volatile session.
Thursday saw the dollar index rising, driven by the Fed’s preferred inflation measure, reinforcing expectations of no rate cuts in the upcoming March or May meetings. The U.S. personal consumption expenditures (PCE) price index met expectations with a 0.3% increase last month, while the core PCE saw a 0.4% rise.
This data follows the earlier release of higher-than-forecast U.S. January consumer inflation figures. Analysts note that while Thursday’s numbers alone might not prompt an imminent rate cut, the consistent tracking below the required month-on-month rate for annual inflation recovery could impact future Federal Reserve decisions.
In essence, the rupee’s cautious movement reflects a delicate equilibrium between India’s strong economic performance and external factors, particularly the dollar’s trajectory. The subdued trading range this week indicates a watchful approach, with market participants keenly observing the interplay of domestic and global dynamics shaping the rupee’s immediate outlook.
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