MUMBAI: The Indian rupee is expected to open little changed to the US currency on Tuesday due to the struggling dollar index and on expectations that the central bank will not allow the local currency to appreciate much from current levels.
The rupee is likely to open at 81.39 per dollar, around the same level as the previous session.
The local currency on Monday climbed to near 80.90 before dollar purchases by public sector banks prompted it to reverse course.
Traders suspected that the bids were likely on behalf of the Reserve Bank of India.
After the turnaround around from 80.90 to 81.50, there is a clear floor (for the USD/INR pair), a trader at a Mumbai-based bank said.
While the near-term trend on the pair is on the downside, there will be little appetite to take the dollar lower after yesterday, the trader said.
A few analysts reckon that apart from the RBI, there were other reasons why the rupee is unlikely to move above 81.
“The rupee has fundamental issues in the form of a lack of flows, low forward premium and (India’s) high current account deficit, which are preventing a very large appreciation for now,” said Srinivas Puni, managing director at QuantArt Market Solutions.
Indian rupee likely to climb past 81/USD on dollar slide, upbeat risk
Portfolio flows into India have been weak to begin the year, with foreign investors taking out nearly $2 billion from equities this month so far.
Debt markets have seen inflows of nearly $200 million, according to data from NSDL. The dollar index inched lower in Asia, hovering around the 102 level. Asian currencies were mostly slightly higher.
The dollar index has been on the defensive — it is down 1.5% this month after falling 7.7% in the December quarter – in the wake of the positive risk appetite and weak US data.
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