Stagnant Rupee with Potential Central Bank Intervention: The Indian rupee displayed minimal fluctuation against the US dollar on Thursday. Early gains were offset by dollar sales initiated by state-run banks, confining the rupee to a narrow range around 83.36 per dollar. This movement was close to its previous day’s closing rate of 83.37.
Record Low and Speculative Support: The rupee had witnessed a historic low of 83.45 on Wednesday, but it managed to recover later in the day. This rebound sparked speculation about the Reserve Bank of India (RBI) intervening in the foreign exchange market to support the rupee. This theory gained traction when state-run banks, which are sometimes seen as agents of the RBI, began selling dollars on Thursday. However, a cautious approach was advised by a senior foreign exchange trader, who suggested that these banks could simply be undertaking their year-end financial activities.
Limited Trading Window and External Influences: With Thursday being the last trading day of the current financial year, currency markets will be shut on Friday and Monday. This short trading window has led analysts to predict that the rupee is likely to trade within a narrow band of 83.25 and 83.45. Broader market sentiment also played a role, with the dollar index experiencing a slight decline. However, remarks from a US Federal Reserve official indicating a potentially more hawkish stance on interest rates caused the probability of a US rate cut in June to decrease. This shift in US monetary policy expectations could influence the USDINR exchange rate in the coming days.
In essence, a relatively stable rupee with a hint of potential intervention by the RBI is expected. The upcoming closure of currency markets and the evolving US monetary policy stance are external factors that could impact the rupee’s movement in the near future.