- The Indian rupee slips over the demand for dollars led by importers and a stable US dollar.
- Speculation about a RBI rate cut presses the short -term perspective of the rupee.
- The USD/INR remains above 85.35, with the next resistance seen about 85.50 and support in 84.80.
The Indian rupee (INR) depreciates against the US dollar (USD) on Tuesday in the mid -dollar demand by importers and a stable US dollar.
At the time of writing, the USD/INR pair quotes around 85.37 during negotiation hours in the United States. It is observed that the torque is recovered from the minimum of two weeks reached on Monday, supported by a stable US dollar.
The US dollar index (DXY), which measures the value of the USD compared to a basket of six main currencies, quotes around 99.20, recovering from a minimum of four weeks. The recovery occurs in the middle of a renewed commercial optimism led by the decision of the president of the USA Donald Trump to delay the imposition of tariffs on the European Union (EU).
The fall of the rupee is mainly attributed to the demand for dollars from the end of the month by local companies and foreign banks.
“Importers have actively covering their dollars in recent sessions, since there is a growing concern that even a modest reversion in the dollar’s trajectory could push the rupe towards the 86.00 mark,” said an operator of a bank based in Mumbai, according to Reuters.
Adding pressure, a rebound in oil prices is generating concerns about the commercial balance of India. The weakness of local actions is also discouraging the feeling of investors and adding downward pressure on the INR.
However, speculation about a possible rate cut by the Indian Reserve Bank (RBI) at the next meeting of the Monetary Policy Committee (MPC) is also weighing on the short -term perspective of the rupee.
Amit Pabari, general director of CR Forex Advisors, said that the perspective of a dovish turn by the RBI is discouraging the upward feeling towards the Indian currency.
“The rupe will probably face a strong resistance near the level of 85.50, and any upward movement could attract seller interest,” Pabari pointed out. “The immediate support is seen in the range of 84.80 to 84.90.”
India Faqs Reserve Bank
The role of the Bank of the Reserve of India (RBI), in its own words, is “… maintain the stability of prices taking into account the objective of growth.” This implies maintaining the inflation rate at a stable 4% level using the interest rates tool mainly. The RBI also maintains the exchange rate at a level that will not cause excess volatility or problems for exporters and importers, since the economy of India depends largely on foreign trade, especially oil.
The RBI formally meets in six bimonthly meetings a year to discuss its monetary policy and, if necessary, adjust interest rates. When inflation is too high (above its 4%target), the RBI will normally increase interest rates to dissuade indebtedness and spending, which can support the rupee (INR). If inflation falls too below the objective, the RBI could cut the rates to promote more loans, which can be negative for the INR.
Due to the importance of trade for the economy, the Bank of the Reserve of India (RBI) actively intervenes in the currency markets to maintain the exchange rate within a limited range. It does so to ensure that Indian importers and exporters are not exposed to unnecessary exchange risks during periods of exchange volatility. The RBI buys and sells rupees in the market in cash at key levels and uses derivatives to cover its positions.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
