The currency’s recent gains follow a decisive recovery from last week’s all-time low of 91.0750, a slump traders attribute to aggressive central bank intervention that curtailed the rupee’s downward momentum.
The measures prompted corporates and speculators to reassess their positions, contributing to the near-term stabilization of the currency.
“The currency has shown a technical reversal after recent intervention-led buying from last week’s lows near 91, stabilising the currency for now and improving short-term stability. Market focus now shifts to key US data including the PCE price index, new home sales, and weekly jobless claims, which could drive fresh volatility," said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Bankers and FX advisors noted that importers are likely to step in following the sharp rebound, potentially limiting further upside for the rupee.
“Once you have printed 91 and then you are back to 89.50 in quick time, it’s obvious the importers will come in fast,” said an FX salesperson at a private sector bank. “It takes at least a few sessions for the market to absorb a move of this kind.”
The 1-month non-deliverable forward suggests the rupee will trade largely flat versus the dollar, having settled at 89.65 on Monday. Early support came from a modest uptick in Asian peers and a decline in the dollar index toward the 98 handle.
The index fell about 0.3% on Monday, continuing its slide in Asian trade amid improved risk appetite and expectations of further Federal Reserve rate cuts.
Further pressure on the dollar was also seen from Japanese intervention threats aimed at curbing the yen’s slide, which provided additional support to the Japanese currency.
-With Reuters inputs
