The currency opened around Wednesday’s close of 83.46 and dropped to 83.67 in the second half. Dealers said that RBI had not intervened in a big way, which led to the rupee closing weaker. Although there were significant outflows, dealers said the weakening was influenced by global factors including a strong dollar and weakness in the Chinese yuan.
“While the key development that the market is waiting for is the Budget, there is now some speculation on the exact quantum of inflows from the inclusion in the JP Morgan Emerging Markets Index expected at the end of this month,” said KN Dey, a forex consultant. “A large potential inflow should have resulted in some activity in the non-deliverable forward market. I feel that in the short term, the rupee will trade in the 83.45-83.75 range until the Budget,” he added.
Foreigners had been selling stocks but buying govt securities due to anticipation of the JP Morgan Index inclusion.
“The Indian cabinet’s approval of higher MSP for 14 kharif crops for the 2024-25 season, alongside increasing crude oil prices, heightened demand for dollars, resulted in the rupee reaching a historic low. Nevertheless, the considerable inflows into Indian equities and bond markets could strengthen the rupee in the near future,” said Rahul Kalantri, VP at Mehta Equities.
“A close above 83.50 would be unfavourable for the rupee, leading to further depreciation towards the 83.95 and 84.2 levels,” he added. Dealers stated that despite hitting a new low, the movement was not a cause for concern, as other Asian currencies have also weakened against the dollar.
