The Reserve Bank of India has in recent days been selling dollars at 83.97 to support the rupee, according to traders.
One of the impacts of RBI’s “incessant intervention” over the last several months has been that rupee will underperform when dollar declines and will outperform when dollar rallies, a treasure official at a bank said.
FED RATE CUTS
The dollar’s drop has been attributed by analysts to expectations around Federal Reserve rate cuts. The Fed is expected to cut rates by 100 basis points this year, beginning in September.
The upbeat risk mood has been another factor cited for the slump in the safe haven dollar.
Investors are eyeing Fed Chair Jerome Powell’s comments on Friday at Jackson Hole. Expectations are for Powell to acknowledge the case for a rate cut.
The current dollar weakness may be a prelude to this week’s Jackson Hole speech by Chair Powell, ING Bank said in a note.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 83.93; onshore one-month forward premium at 7.5 paisa
** Dollar index at 101.88
** Brent crude futures down 0.4% at $77.3 per barrel
** Ten-year U.S. note yield at 3.87%
** As per NSDL data, foreign investors bought a net $142.5 mln worth of Indian shares on Aug. 16
** NSDL data shows foreign investors bought a net $54.8 mln worth of Indian bonds on Aug. 16
Source from Reuters: https://www.reuters.com/markets/currencies/rupee-likely-underperform-regional-peers-amid-dollars-slide-2024-08-20/