The Indian rupee is expected to open relatively flat this Monday but with a slight positive bias. Gains in most of its regional peers are providing support. However, traders are keeping a close watch on comments from Federal Reserve Chair Jerome Powell. His words could offer vital clues on future rate cuts. The 1-month non-deliverable forward showed the rupee opening at around 83.68-83.70 against the U.S. dollar, nearly unchanged from its last close at 83.70.
Across Asia, currencies are trading stronger. The Malaysian ringgit leads with a 0.5% rise, and the offshore Chinese yuan is holding above 7 per U.S. dollar. Despite these positive signals, traders anticipate that the rupee's gains will remain muted. This is primarily due to month-end dollar demand from Indian importers, which is likely to keep the rupee in check.
The rupee is on track to record its best monthly performance since January. This impressive run is due to improved risk appetite following the Federal Reserve’s rate cuts. Additionally, India has seen substantial portfolio inflows. Overseas investors have poured in nearly $11 billion into Indian bonds and equities in September alone. This marks the highest monthly inflow on record. Meanwhile, dollar inflows have bolstered the Reserve Bank of India’s foreign exchange reserves to a new peak of $692.3 billion.
Investors will be paying close attention to Jerome Powell’s remarks for insights on the size of the next expected rate cut, potentially coming in November. Another key area of focus is the Middle East, where escalating tensions could affect oil prices. Oil is crucial for Asian economies, and fluctuations in prices could directly impact currencies. However, Saudi Arabia's potential plans to increase oil production could ease upward pressure on prices, limiting negative impacts on the rupee and other Asian currencies.
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Rupee gains as Asian currencies rally, but dollar demand from Indian importers may limit further advances. Stay updated on Forex news.
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