MUMBAI: The Indian rupee strengthened against the dollar on Monday, helped by expectations of inflows and a slight improvement in risk sentiment. The rupee traded at 82.3175 per dollar by 11:05 a.m. IST, compared with its previous close of 82.48.
The currency last week gave up all its post-Federal Reserve meeting gains once a selloff in Deutsche Bank shares began amid concerns over the health of the global financial sector.
On Monday, Indian equities firmed, while US and European stock futures advanced on news that First Citizens BancShares Inc would acquire all of Silicon Valley Bank’s (SVB) deposits and loans from the Federal Deposit Insurance Corporation (FDIC).
Risk sentiment is “somewhat better” and inflows from likely exporter-led dollar sales in the final week of the financial year could see the rupee find some support, but worries about the mood turning negative anytime persisted, said a private bank trader.
“For the week, we expect the rupee to be range-bound between 82.20-82.50. Importers can take advantage of this to hedge near-term exposures,” said Ritesh Bhansali, vice-president at Mecklai Financial Services.
The collapse of SVB and other mid-sized US-lenders, besides Credit Suisse’s takeover by UBS, over the past two weeks has roiled markets, with investors becoming extremely sensitive to new developments and rushing to safe-havens.
Other Asian currencies were weaker as the dollar index gained and US bond yields stayed low. Bond yields have also reacted to a sharp repricing of Fed terminal rate expectations lately.
Indian rupee edges up but muted risk sentiment caps gains
The central bank mellowing its hawkish tone last week has seen futures price in a 71% possibility of the Fed holding rates at its May meeting and about 80 basis point worth of rate cuts in 2023.
Investors will await the reading of the Fed’s preferred inflation measure, the US personal consumption expenditures price index data, due on Friday.
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