The Indian rupee stayed nearly flat on Wednesday, hovering at 83.69 against the U.S. dollar by 11:00 a.m. IST, barely changed from its previous close at 83.6875. This steadiness came despite the currency nearing a record low of 83.7150 on Tuesday.
See: Indian rupees trading at 83.782 on the VT Markets app.
Pressure on local equities, following the government’s budget announcement of increased tax rates on profits from equity investments and equity derivatives trades, contributed to the decline.
Overseas investors, who had pumped nearly $5 billion into Indian markets this month, reacted by net selling over $350 million worth of Indian shares post-budget. This selling pressure was evident in the local stock markets, with both the BSE Sensex and Nifty 50 indices down by about 0.2%.
State-run banks were seen offering dollars near the 83.70-83.71 levels on Wednesday, likely on behalf of the Reserve Bank of India (RBI).
This intervention, though mild, played a crucial role in averting a steeper decline of the rupee. Market expectations suggest that the RBI’s actions to cap the currency’s weakness provided additional support.
However, traders expect the rupee to gradually settle in a weaker range between 83.50 and 83.80, despite the RBI’s likely continued interventions. The sentiment that the rupee will underperform on a broadly weaker dollar is prevalent.
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The dollar index stood at 104.4, having declined by 1.3% in July, while the rupee weakened by about 0.3% in the same period. This dynamic hints at broader market movements and the rupee’s relative performance.
See: Dollar index edges lower to 104.250 on the VT Markets app.
Investors are now eyeing upcoming U.S. economic data, particularly GDP and personal consumption expenditures (PCE) inflation data due on Thursday and Friday, respectively. These figures are expected to provide cues on the future path of U.S. interest rates, which will indirectly impact the rupee.
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