The Indian rupee is expected to continue its slight depreciation on Tuesday, following the trend of most Asian currencies that weakened ahead of key central bank policy decisions scheduled for later this week.
Non-deliverable forwards suggest the rupee will open largely unchanged from its previous session’s close at 83.7275 against the U.S. dollar. The rupee had hit a record low of 83.74 on Monday, pressured by sustained dollar demand from local importers, likely related to month-end payment outflows, according to traders.
The dollar index stood at 104.6 after a 0.2% rise on Monday, while Asian currencies slightly weakened, with the Indonesian rupiah leading the losses, down 0.3%.
Despite the rupee reaching record lows in five of the last six trading sessions, interventions by the Reserve Bank of India (RBI) have ensured that the decline has been gradual. The RBI has not been protecting any specific level but has ensured that the dollar-rupee pair is “well-offered on upticks,” which is likely to continue, said a foreign exchange trader at a large private bank.
This week’s focus is on three key central bank policy decisions, starting with the Bank of Japan and the Federal Reserve on Wednesday, followed by the Bank of England on Thursday.
While the Fed is widely expected to keep rates unchanged, investors will pay close attention to remarks from Chair Jerome Powell for cues on the future path of policy rates. Interest rate futures are currently pricing in about 66 basis points of rate cuts over 2024, starting in September.
We think that the market may have already anticipated a dovish cue at this week’s FOMC meeting. In the absence of a crisis, calibrated cuts are still the most likely outcome,” DBS Bank said in a note.
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