MUMBAI: The Indian rupee is expected to weaken on Tuesday, as the dollar gained on tepid risk appetite, with investors keeping tabs on the Adani Group saga, the upcoming Union budget and global central bank meetings. The rupee was seen around 81.60-81.65 per dollar in early trades, compared to its previous close of 81.4950.
The currency’s future direction will be clear once the risk events this week are out of the way and we are likely to continue see rangebound moves until then, said a trader with a Mumbai-based bank.
We don’t expect much fallout from the Adani Group-led selloff in equities but the situation will have to be monitored, the trader added. So far, there has been a limited impact on the currency, but foreign investor outflow has reached more than $1 billion over the past three sessions since the Hindenburg report was published.
Meanwhile, most Asian emerging market currencies declined as the dollar index climbed above the 102 level overnight, with caution setting in ahead of the US Federal Reserve decision due late on Wednesday.
While a 25-basis-point hike is widely expected, a key marker would be how Fed officials respond to markets pricing in rate cuts later this year. Investors also await India’s Union budget on Feb. 1, in which the focus will be on the government’s fiscal consolidation path. India’s annual pre-budget economic survey is likely to peg GDP growth at 6-6.8% for 2023-24, the slowest in three years, a source told Reuters.
Indian rupee to start important week muted, equity flows watched
“Depreciation pressures on the rupee are expected to resurface in fiscal 2024,” said Gaura Sen Gupta, an economist at IDFC First bank. Even as India’s current account deficit is expected to narrow, the improvement could be limited by export weakness as global growth is expected to be weaker over the period, Sen Gupta added.
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