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