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The Indian rupee opened marginally higher at 89.64 against the US dollar on Tuesday, almost unchanged from Monday’s close of 89.65. The currency’s strength in the near term has been fueled by a weakening US dollar, but this may soon be checked due to fresh dollar buying by importers, as reported by Reuters.
The relaxation in the value of the US dollar has provided temporary relief to the rupee, which witnessed quite volatile sessions over the past few days.
According to market experts, this relaxation seen around the US dollar valuation has resulted in a momentary stabilization of the rupee, despite concerns over capital flow and trade ties. However, they also pointed out that importer bids would resist sharp gains.
Last week, the rupee was seen touching the psychologically important level of 91 per US dollar before repositioning to a high of 89.25. However, the sudden turnaround came as a result of interventions by the Reserve Bank of India (RBI).
The organization sold US dollars to limit speculation against the rupee. It was obvious that the Reserve Bank was uncomfortable with the falling rupee value, which is why it decided to take remedial measures.
This is attributed to a significant amount of uncertainty resulting from the stalled trade agreement between India and the US, which has led to a decline in foreign portfolio investments in Indian stocks.
A perception that the RBI had not acted on time to save the rupee from depreciating has also affected the currency. Last year’s dollar obligations from local companies had further contributed to this problem.
Also Read: Rupee Crashes Past 90, Daily Essentials and Consumer Goods Set to Cost More
RBI Governor Sanjay Malhotra has once again emphasized that the bank does not target any range for the Indian Rupee, leaving it to market forces. According to several market participants, the Rupee may not breach the 92 dollar level in the coming days.
Most predictions show that the Indian rupee is likely to trade in the range of 89-90. A beneficial deal depends on whether the Fed is expected to deliver an interest rate cut.
This is likely to help emerging market currencies, including the Indian rupee. Opinions remain divided on whether an interest rate cut by the RBI would help the economy or result in further depreciation of the nation’s currency.
