Rupee Closes Flat Against U.S. Dollar
The Indian rupee ended nearly flat on Tuesday, closing at 83.4850 against the U.S. dollar, a slight change from its previous close of 83.4925. The currency’s performance mirrored the subdued price action of its Asian peers as investors awaited Federal Reserve Chair Jerome Powell’s testimony for clues on the future direction of U.S. interest rates.
Rangebound Trading and State-Run Bank Activity
The rupee traded within a narrow band of 83.4775-83.51 throughout the session, maintaining an intra-day trading range of under 10 paisa so far in July. According to a foreign exchange trader at a foreign bank, Indian state-run banks were active on both sides of the market, similar to Monday’s activity, which contributed to the rupee’s tight trading range alongside mostly quiet Asian currency movements.
Federal Reserve Chair Powell’s Testimony
Federal Reserve Chair Jerome Powell is scheduled to deliver his semi-annual testimony on monetary policy to U.S. lawmakers on Tuesday and Wednesday. Market participants are keenly awaiting his remarks, hoping for insights on the timing of potential Federal Reserve rate cuts following a series of economic data releases.
Impact of U.S. and Indian Inflation Data
The U.S. dollar index is expected to hover around 105 in anticipation of the U.S. Consumer Price Index (CPI) data release on Thursday. According to ING Bank, any dovish surprises from Powell’s testimony might be counterbalanced by European Union political concerns. Following the U.S. inflation data, India is set to release its inflation reading on Friday.
Rupee’s Trading Range and RBI’s Support
Despite various global economic cues lined up for the week, traders anticipate that the rupee will remain largely within its current trading range. The currency is expected to find strong support near 83.60 due to expectations that the Reserve Bank of India (RBI) will intervene to prevent sharp declines. Conversely, the rupee faces stiff resistance in efforts to rise above 83.25.
Conclusion
The Indian rupee’s flat closing against the U.S. dollar amid rangebound trading in Asian currencies underscores the market’s cautious stance ahead of key economic events. Jerome Powell’s testimony and upcoming inflation data from the U.S. and India are likely to provide crucial direction for the rupee in the coming days. Traders and investors will closely monitor these developments to gauge the potential impact on the currency’s movement.
