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Updated January 10th, 2024 at 08:40 IST

Rupee faces uphill battle against strengthening Dollar

Despite attempts on Monday and Tuesday, Rupee failed to sustain an advance to the 83.00-83.05 region, stressing the significance of small movements.

Reported by: Business Desk
Rupee closes slightly higher, supported by dollar inflows
Rupee | Image:Republic
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Rupee versus Dollar: The Rupee is anticipated to encounter mild downward pressure on Wednesday, as the US Dollar gains momentum and the Asian currency grapples with breaching a crucial resistance level.

Non-deliverable forwards suggest that the Rupee may open either flat or weaker against the Dollar, following its previous session's close at 83.1150.

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Despite attempts on Monday and Tuesday, the Rupee failed to sustain an advance to the 83.00-83.05 region, stressing the significance of small movements in a currency of this narrow range. An FX trader at a bank remarked that the inability to surpass the 83 mark is a dampener, especially with the Dollar showing signs of resuming its upward trend.

The Dollar index, boosted by a slightly weak risk appetite, has reclaimed 102.50. The S&P 500 stock index experienced a marginal dip on Tuesday, and Asian equities exhibited a mixed performance.

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Asian currencies, including the offshore Chinese yuan, saw declines ranging from 0.1 per cent to 0.4 per cent, with the latter hitting its lowest point in almost a month.

The trajectory of the Dollar is expected to hinge largely on the outlook for US Federal Reserve rate cuts. Investors have priced in more rate cuts for the year than what the central bank has forecasted. The US inflation update on Thursday is a crucial data point, with a soft print likely reinforcing expectations of a rate cut in March, causing near-maturity US Treasury yields and the Dollar to dip.

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BofA Securities noted in a recent forecast that they expect the headline and core CPI (consumer price index) to rise by 0.3 per cent month-on-month. This data could influence Fed funds market pricing, with a forecast aligned with expectations keeping a March cut in play.

Key indicators

  • One-month non-deliverable Rupee forward at 83.22; onshore one-month forward premium at 9 paisa.
  • Dollar index up at 102.52.
  • Brent crude futures up 0.4 per cent at $77.9 per barrel.
  • Ten-year US note yield at 4.02 per cent.
  • NSDL data reveals foreign investors bought a net $34.3 million worth of Indian shares on January 8.
  • NSDL data indicates foreign investors bought a net $11.7 million worth of Indian bonds on January 8.

(With Reuters inputs.)

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Published January 10th, 2024 at 08:40 IST

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