Rupee to cling to 83.50/USD amid resurgent dollar, central bank support

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee is expected to open little changed and hold a narrow range on Wednesday amid dollar strength and a central bank that is likely to intervene.

Non-deliverable forwards indicate the rupee will open barely changed from its close of 83.5075 in the previous session.

The rupee spent a large part of Tuesday’s session near 83.50 on likely dollar selling by the Reserve Bank of India.

“Today should be very similar to yesterday, with the action centered around 83.50,” an FX trader at a bank said.

“All through yesterday, it did seem a hand was on offer at 83.50, which based on how it has been, must be the RBI.”

The dollar index inched up to 105.54 amid renewed weakness on the Japanese yen, which percolated down to other Asian currencies. The offshore Chinese yuan weakened to 7.2294 and other Asian currencies dipped between 0.2% and 0.5%.

The dollar index sell-off has stalled after finding support at the 105 level, MUFG said in a note.

The yen dropped to 155.20 to the dollar, well off its peak of 151.86 from last week, on the back of possible intervention from Japanese authorities. The US-Japan interest rate differential has been a major factor in the yen’s decline.

And indications are that US interest rates are unlikely to come down in a hurry, which would mean that the yen and other Asian currencies will not see much relief.

Futures are pricing in less than two US interest rate cuts this year, which is quite a way from the six to seven that were discounted at the beginning of the year.

Several Fed speakers are lined up to talk in the coming days, which will give investors insights on the rate path.

(Reporting by Nimesh Vora; Editing by Savio D’Souza)