Rupee has been at a risk of dipping past 84 for a large part of this month
Tuesday is predicted to be a challenging day for the Indian rupee due to rising oil prices, a decrease in Asian currencies, and a poor appetite for risk.
Based on the one-month non-deliverable future, the rupee is expected to depreciate from its previous close of 83.90 to flat against the US dollar.
On Monday, the rupee failed to benefit from Federal Reserve Chair Jerome Powell's dovish turn last week at the Jackson Hole summit. The opening value of the currency was 83.80, but importers' dollar demand caused it to drop.
This "has been a pattern", the dips (on dollar/rupee) "just do not hold", an FX salesperson at a bank said.
"I think its only a matter of time that we see 84 and higher and we are advising companies to hedge keeping that in mind."
The rupee has been at a risk of dipping past 84 for a large part of this month, which it has largely avoided mainly due to heavy intervention by the Reserve Bank of India at 83.96-83.97 via public sector banks, traders say.
The optimism that followed Powell's shift to lower interest rates in Asia was short-lived. While the dollar index made a small recovery, shares and currencies fell.
According to a note from ING Bank, markets will "remain fairly quiet" until Friday, when the US July PCE inflation data are released.
Oil prices increased as U.S. Treasury yields gradually increased. Concerns over escalating hostilities in the Middle East caused Brent crude to rise more than 3% on Monday.
The magnitude of Fed rate decreases and the U.S. presidential elections in November will have a significant impact on how Asian currencies perform for the rest of the year.
While a rate cut has been fully priced in for next month, there is uncertainty on the size. Meanwhile, the U.S. elections are currently a toss up.
Source: Reuters
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