Updated February 22nd, 2024 at 08:44 IST

Rupee to open stronger amid positive market sentiment

Public sector banks were observed purchasing dollars, with speculation suggesting this activity may be on behalf of the Reserve Bank of India.

Reported by: Business Desk
Rupee | Image:Unsplash
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Rupee to open strong: The rupee is set to open higher on Thursday, in line with most Asian currencies, reflecting improved market sentiment. However, it is anticipated to encounter demand from importers, limiting its upside potential.

Forecasts from non-deliverable forwards suggest the rupee will start trading at approximately 82.92-82.94 against the US dollar, a slight increase from the previous session's close of 82.97. Despite briefly climbing to 82.8650 on Wednesday, the rupee ended the day lower.

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Public sector banks were observed purchasing dollars, with speculation suggesting this activity may be on behalf of the Reserve Bank of India or importer clients. Regardless, there is evident demand for the US dollar on dips in the USD/INR pair.

The rupee's movement is expected to remain within the well-defined range of 82.80-83.30, with ongoing fluctuations anticipated.

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Asian currencies experienced gains on Wednesday, while the dollar index remained just below 104. Positive sentiment was fueled by advancements in Asian shares and US equity futures, following Nvidia's better-than-expected first-quarter revenue.

In the US, the minutes of the Federal Reserve's January meeting revealed concerns among policymakers regarding the risks associated with premature interest rate cuts. The recent increase in US Treasury yields was influenced by this sentiment, alongside weaker-than-expected bond auctions.

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Market expectations for a Fed rate cut have diminished, with the likelihood of a cut at the May meeting below 30 per cent. Forecasts now suggest a more modest reduction in borrowing costs by the Fed this year, compared to earlier projections. Amidst this backdrop, the Fed's cautious approach to rate adjustments indicates a reluctance to implement immediate cuts, given the potential implications of rapid changes in interest rates.

(With Reuters inputs)

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Published February 22nd, 2024 at 08:44 IST