Key points:
- The Indian rupee is expected to continue its downward trend due to pressure from sustained dollar demand and weakening Asian currencies.
- Central bank policy decisions from the Bank of Japan, the US Federal Reserve and the Bank of England are pivotal this week.
This article is a follow up to: Rupee likely to stay near record lows
The Indian rupee is set to trade with a slight depreciation bias, reflecting broader regional currency trends. The rupee (Symbol: USDINR) is anticipated to open largely unchanged from its previous close of 83.7275 against the US dollar.
This comes after the rupee hit a record low of 83.74, pressured by sustained dollar demand from local importers related to month-end payment outflows.
Picture: The Indian rupee continues to lose strength against the US dollar, as observed on the VT Markets app.
Market dynamics
The dollar index (Symbol: USDX) stood at 104.6 after a marginal rise. Concurrently, most Asian currencies weakened slightly, with the Indian rupee leading losses. Despite such record lows over the past week, interventions by the Reserve Bank of India (RBI) have ensured that the decline remains gradual.
Three other key central bank policy decisions this week also include:
The Bank of Japan (BoJ): Expected to address its interest rate policy on Wednesday.
The US Federal Reserve (“the Fed”): Likely to keep rates unchanged but will provide guidance on future policy through Chair Jerome Powell’s remarks.
The Bank of England (BoE): Set to announce its interest rate decision on Thursday.
Market sentiment and outlook
These decisions are critical as they influence global economic sentiment and capital flows. The stance of the US Federal Reserve could have a broad impact. If the Fed signals a dovish outlook, the rupee might face further pressure against a strengthening dollar.
Related content: Interest rate tug-of-war for central banks
The rupee’s recent dip provides potential trading opportunities, especially with the expected volatility surrounding central bank announcements. Traders should monitor key economic indicators from the US and other major economies closely. A nuanced approach, balancing potential gains against the backdrop of central bank actions, will be crucial for navigating these market dynamics effectively.
