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What’s going on with the Indian Rupee vs. Dollar (USD/INR)?

What’s going on with the Indian Rupee vs. Dollar (USD/INR)?

Earlier this year, the US dollar (USD) soared to a record high of 83.44 against the Indian rupee (INR). Fueled by a confluence of factors, including a dip in oil prices and assertive declarations from the Federal Reserve, the greenback strengthened its position significantly. 

Although the rupee has since regained some footing, it continues to linger noticeably weaker against the US dollar compared to its standing a year ago. 

What’s the latest on USD/INR?

On Monday, November 13, the rupee ended almost flat against the dollar as traders avoided entering large-sized positions in a holiday week on expectations that the Reserve Bank of India (RBI) would intervene to prevent any volatility in the national currency. 

As such, the USD/INR pair closed at 83.33, compared to the previous close of 83.34. The rupee moved in a tight range of just 4 paise during the Monday session. 

USD/INR 1-day chart. Source: Google

On Friday, November 10, the rupee fell to a low of 83.42 following a technical system outage. According to traders, India’s central bank stepped in to prop up the INR.  

The market participants are on alert as they await the latest US inflation report, set to be unveiled on Tuesday. The consumer price index (CPI) data will provide traders with more cues, while India’s financial markets will be closed on the same day for a national holiday. 

Economists expect US headline prices to have risen by 0.1% month-over-month in October, driven by lower energy prices. Simultaneously, the core Consumer Price Index (CPI) is projected to increase by 0.3% month-on-month and by 4.1% year-over-year.

Analysts’ views on USD/INR

The state-owned banks were supplying dollars in the spot market on Monday, however, traders argued it was difficult to determine whether that was meant for their clients or for the RBI. 

“Since October, the rupee remained in the range with record low volatility – the main target of the central bank.”

said Dilip Parmar, a foreign exchange (Forex) analyst at HDFC Securities.

That said, the INR could continue trading in the 83.00-83.60 range as long as volatility stays low and the window for banks to enter fresh positions remains open, said Parmar. 

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