Tuesday, May 2, 2023

Rupee hopes to maintain its upward trend with the help of dollar inflows

MUMBAI: On Thursday, the Indian rupee will attempt to outperform the US dollar while competing with a variety of Asian currencies.

The rupee will open at around 81.70-81.75 to the dollar, down from 81.76 the previous session, according to the non-deliverable forwards.

Wednesday's afternoon session saw a rally for the local currency, aided by significant dollar sales by two foreign banks that, according to some traders, were primarily related to IPOs.

A spot trader stated, "Sizeable (dollar) offers (from foreign banks) and the Reserve Bank of India not being there is making us hopeful of a breakdown (on USD/INR)."

"Clearly, that could rapidly change in the event that the RBI chooses to mediate and not permit more drawback (on USD/INR."

The rupee will have to contend with low risk appetite and mixed Asian peers to maintain its momentum. After the S&P 500 Index suffered overnight losses, Asian shares struggled for direction. The seaward Chinese yuan was minimal changed at 6.94 to the dollar, while the Korean won debilitated.

The upbeat euro, which was close to a one-year high, weighed on the dollar index overnight, as Europe's resilient economy contrasted with banking contagion risks in the United States and the debt ceiling standoff.

A bill to raise the government's $31.4 trillion debt ceiling that also includes significant spending reductions over the next decade was narrowly passed by the US House of Representatives on Wednesday. The Senate is unlikely to approve the bill.

According to the data, shipments and new orders for key US-made capital goods decreased in March more than anticipated.

In a daily note to customers, ANZ stated, "It is possible that business fixed investment is slowing in response to higher interest rates."

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