MUMBAI: The Indian rupee is set to open largely unchanged on Wednesday and trade in a narrow range, with expectations of central bank support blunting pressure from slightly softer Asian cues.
The 1-month non-deliverable forward indicated the rupee will open flat, having settled 0.12% higher at 90.1650 on Tuesday.
The rupee snapped a four-day losing streak in the last session, with bankers flagging possible support from the Reserve Bank of India, though there was no clarity over the extent and nature of the central bank’s involvement.
The currency rallied to nearly 90.10 intraday before importer demand, and to a lesser extent speculative dollar buying, surfaced.
Before Tuesday’s modest recovery, the currency had witnessed a near 1% drop in a span of two weeks.
“After a fairly decent move higher (on dollar/rupee), it was only natural to see a sort of a pullback in dollar/rupee,” a currency trader said, adding, “The RBI may have stepped in to temper the building momentum.”
“The bigger picture, however, from the recent price action and flows, is that the structural bias is for a weaker rupee remains biased weaker, with RBI intervention or expectations of it smoothing the pace.”
Meanwhile, most Asian currencies inched lower, while the dollar index hovered near 98.50.
The focus will be on a busy slate of U.S. economic releases this week, which traders say will shape expectations for the Federal Reserve’s rate path.
MUFG Bank reckons that the upside on dollar, which it said was finding support at 98, remains constrained for now amid market expectations of further Fed rate cuts.
Markets have thus far largely shrugged the U.S. intervention in Venezuela and the capture of President Nicolas Maduro. U.S. equities rallied on Tuesday, while U.S. Treasuries dipped.
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