What’s going on here?
The Indian rupee is expected to open slightly lower today, mirroring declines in other Asian currencies, with everyone focusing on the Reserve Bank of India’s next move.
What does this mean?
The one-month non-deliverable forward (NDF) hints at a slight drop from the previous closing value of 83.9250 to the US dollar. While the rupee has been relatively stable, low volatility suggests a potential downside breakout. Persistent import demand, weak portfolio flows, and underperformance against the dollar contribute to this bearish outlook. The RBI has been actively intervening around the 83.94-83.97 level to keep the rupee below the 84 threshold. Continued RBI support is crucial to prevent further weakening, according to a currency trader.
Why should I care?
For markets: RBI’s balancing act.
Asian currencies are currently down, with market attention fixed on the US interest rate outlook following Fed Chair Jerome Powell’s hint at a potential rate cut in September. Key upcoming data, including the US core price consumption expenditure and labor market indicators, will guide the Fed’s decisions. MUFG Bank suggests that markets are awaiting the next big catalyst, which could come from the Fed or shifts in global growth expectations. The dollar index stands at 100.66, Brent crude futures are priced at $79.6 per barrel, and the ten-year US note yield is at 3.83%.
Zooming out: Global impacts on local markets.
Foreign investors acquired a net $115.6 million in Indian shares and $244.1 million in Indian bonds two days ago, per NSDL data. Despite bearish sentiment, there’s sustained foreign interest. Key indicators highlight a fragile balance: the one-month NDF rupee is at 84.02, and the onshore one-month forward premium is at 7 paisa. The interplay between global conditions and RBI’s interventions will dictate the rupee’s near-term trajectory.
