The Indian rupee opened flat against the US dollar on Tuesday amid expectations of continued RBI intervention. Market participants are waiting on the sidelines for the release of US inflation data due tomorrow for insights on the scale of the Federal Reserve’s anticipated interest rate cut.
The rupee opened at Rs 83.95 against the US dollar, according to Bloomberg data. The domestic currency had closed at Rs 83.95 on Monday.
For now, the rupee remains steady, trading within a defined range and testing the patience of market participants, said Amit Pabari, managing director of CR Forex Advisors. "Its resilience at current levels highlights the temporary nature of the situation, with no fundamental weaknesses in sight. However, what stands between the rupee and potential volatility is the Reserve Bank of India," he said.
With foreign institutional inflows exceeding $21 billion in this financial year, alongside significant corrections in asset classes like the dollar index and crude oil prices, the RBI has maintained its strategy of absorbing the incoming flows to limit appreciation of the rupee, Pabari said. "A breach of the Rs 84.00 mark could see the rupee slide to Rs 84.10-84.20, while a trend reversal might only materialise if it strengthens past Rs 83.80."
The US dollar index was 0.10% higher at 101.66 at 9:10 a.m. IST. Brent Crude was trading 0.10% lower at $71.77 per barrel, as oil held only a one-day gain.
All eyes will be on the upcoming US CPI data, set to release tomorrow. Expectations lean toward a softer reading, which could increase the likelihood of the Fed opting for a larger than the anticipated 25 basis points rate cut, said Pabari. "Such a move could push the dollar index down to around 100, providing much-needed support for emerging market economies."
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