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Indian Rupee Gains Limited by Importer Demand and Fed Outlook

Indian Rupee Gains Limited by Importer Demand and Fed Outlook

Indian Rupee Faces Limited Gains Amid Importer Demand and Fed Outlook

The Indian rupee gains slightly higher on Monday. It gains support from modest improvements in regional currencies. Meanwhile, the U.S. dollar remains near a five-month low due to uncertain trade policies and weak economic data.

Regional Peers Offer Some Support

The Indian rupee's one-month non-deliverable forward suggests an opening at around 86.96-86.97 per U.S. dollar. This is only a slight improvement from its previous close of 86.9975. Other Asian currencies are also seeing gains, ranging from 0.1% to 0.3%. At the same time, the dollar index has dipped slightly to 103.7.

On Friday, data showed a sharp decline in U.S. consumer sentiment. It dropped to its lowest point in over two years. Inflation expectations also surged due to concerns over U.S. trade tariffs. The dollar index has fallen about 6% from its January high as recession fears grow.

Federal Reserve Meeting in Focus

Investors are watching the Federal Reserve’s upcoming policy decision. The Fed’s stance on interest rates will influence global currency movements. A shift in rate expectations may support the dollar, putting pressure on the rupee and other Asian currencies.

Currently, markets expect nearly three U.S. rate cuts this year. However, a reduction in these expectations could strengthen the dollar. MUFG Bank noted that fewer expected rate cuts might limit gains for Asian currencies, including the Indian rupee.

Importer Demand May Cap The Indian Rupee Gains

Despite regional support, importers may restrict the gains of Indian rupee. Traders report strong buying interest for dollars whenever the rupee moves below 87 per U.S. dollar. Importers use these dips to hedge their currency exposure.

Additionally, foreign portfolio flows will play a crucial role in the rupee’s movement. Foreign investors have sold about $3.5 billion in Indian stocks this March. The total outflow for the year has now exceeded $16 billion. This selling pressure could weigh on the rupee in the near term.

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Get the latest Forex trading insights and updates about the Indian rupee gains. Visit our website for in-depth analysis: Fixio Markets.

Indian Rupee Gains Limited by Importer Demand and Fed Outlook

Indian rupee gains slightly as regional peers strengthen. However, importer demand and the Fed’s outlook may limit further appreciation.

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DANIEL JOHN GRADY
Author

Daniel John Grady is a financial analyst and writer. He is a former CFO with a degree in Financial Management and has been published in both English and Spanish. With over ten years of equities trading experience, he is primarily interested in foreign exchange and emerging markets with a focus on Latin America.

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