Indian Rupee Faces Minor Weakening Amid Dollar Index Rise
The Indian rupee saw a slight weakening on Thursday, influenced by a decline in other Asian currencies and subdued risk sentiment. As of 10:25 a.m., the rupee stood at 83.3050 against the U.S. dollar, a 0.04% decrease from its previous close at 83.2750.
The dollar index reached 102.45, marking a 1% increase in January after consecutive monthly declines in November and December. The dollar's recovery is supported by a moderation of expectations for potential rate cuts in the U.S. Investors are now estimating a 27% chance that the Federal Reserve will maintain rates at its March meeting, up from under 10% a week earlier, according to CME's FedWatch Tool. Minutes from the Fed's December policy meeting indicated policymakers' comfort with progress on controlling inflation but provided little clarity on when rate cuts might occur.
Traders anticipate that the rupee will likely remain within its existing narrow range due to the Reserve Bank of India's active involvement in the currency market. A senior FX trader at a foreign bank noted, "It's one big player who is running the market. Now if inflows come in, they will come to buy (dollars)... if outflows come, they will come to sell," referring to the central bank's interventions.
Despite a record high of $10.1 billion in monthly portfolio inflows into India in December, the rupee only ended the month marginally stronger. Amit Pabari, managing director at FX advisory firm CR Forex, emphasized the rupee's resilience, stating, "Overall, the 83.30-40 range is a strong resistance for the pair."
Asian currencies, including the Thai baht, experienced declines on Thursday, contributing to the overall weakening trend.
Investors are now eagerly awaiting U.S. initial jobless claims data later in the day, followed by the closely watched non-farm payrolls and unemployment data scheduled for Friday.
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By- Sahiba Suri
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