Key points:
The Indian rupee saw a modest rise on Tuesday, trading at 83.6250 against the U.S. dollar as of 09:30 a.m. IST, up slightly from its previous close of 83.6575. This rise aligns with the overall trend of stronger Asian currencies, with the Korean won leading the gains with a 0.3% increase. Meanwhile, the dollar index remained relatively stable at 104.2.
See: Rupee edges higher, trading at 83.763 on the VT Markets app.
This slight appreciation of the rupee comes after it hit its weakest level on record on Monday due to sustained dollar demand from local importers. Additionally, the Reserve Bank of India’s absorption of dollar inflows has limited the rupee’s potential for appreciation.
Investors are now focused on Indian Prime Minister Narendra Modi’s first post-election budget, scheduled for presentation at 11:00 a.m. IST. This budget is expected to outline an economic strategy that balances fiscal responsibility with the demands of voters and coalition partners.
Key numbers to watch in the budget include the government’s fiscal deficit target and gross market borrowing estimates for the financial year. Median forecasts predict the fiscal deficit target will remain at 5.1%, consistent with February’s interim budget.
The rupee is expected to stabilise within the range of 83.40-83.70. Meanwhile, dollar-rupee forward premiums have slipped, with the 1-year implied yield down by 1 basis point at 1.74%.
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The slight rise in the rupee indicates a cautious optimism among investors ahead of the budget presentation. If the fiscal deficit target aligns with forecasts and the gross borrowing estimates are conservative, the rupee may see further stability.
However, any deviation from expectations could lead to volatility. Monitoring the budget’s impact on investor sentiment will be crucial in the coming days.
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