Updated February 23rd, 2024 at 08:49 IST

Rupee gains momentum with inflows, targets key resistance

The RBI refrained from intervening in the market to purchase Dollars late in the session on Thursday, a departure from its actions in the preceding two days.

Reported by: Business Desk
Rupee Vs. Dollar | Image:Unsplash
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Rupee versus Dollar: The Rupee is poised to challenge a significant threshold bolstered by Dollar inflows on Friday, as market participants remain vigilant for potential intervention by the Reserve Bank of India.

Forecasts from non-deliverable forwards suggest the Rupee will open nearly unchanged against the US Dollar from its previous session's close at 82.84.

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Commenting on the current market dynamics, a foreign exchange trader noted, "There are plentiful inflows, largely on the capital side and to an extent on the portfolio front."

He added, "What matters now is whether you see a drop (on USD/INR) below 82.75-82.80, and we have a new lower range. Like it has been for several months, all depends on what RBI (Reserve Bank of India) wants."

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The RBI refrained from intervening in the market to purchase Dollars late in the session on Thursday, a departure from its actions in the preceding two days, which contributed to the Rupee reaching its strongest level since September on a closing basis.

To breach the 82.75-82.80 threshold, the Rupee will need to confront the uptick in near-term US Treasury yields and diminishing prospects of an imminent Federal Reserve rate cut.

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The surge in US equities and encouraging labor market data, including a unexpected decline in new claims for unemployment benefits last week, have propelled US yields higher.

DBS Research commented in a note, "If claims surprise in the next couple of weeks, they could reverse the expectations for February’s US nonfarm payrolls to fall below 200,000 a fortnight from today."

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Additionally, robust US existing home sales data further supports the notion that the Fed can afford to maintain a patient approach regarding rate cuts.

The 2-year US bond yield has climbed to its highest level since mid-December, marking a 60-basis-point increase from the year-to-date low.

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Key Indicators

  • One-month non-deliverable Rupee forward at 82.92; onshore one-month forward premium at 7.50 paisa
  • Dollar index inches down to 103.88
  • Brent crude futures at $83.36
  • Ten-year US note yield at 4.33 per cent
  • NSDL data reveals foreign investors bought $47.5 million of Indian shares on Feb. 21, while selling $59.9 million of Indian bonds on the same day.
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Published February 23rd, 2024 at 08:49 IST