MUMBAI: The Indian rupee was slightly lower on Monday, as U.S. dollar demand from importers offset positive cues such as strength in most Asian currencies and state election wins for India’s ruling party.
The rupee was at 83.3175 against the dollar as of 11:00 a.m. IST, weaker by 0.04% compared with its close at 83.2875 in the previous session.
While the rupee opened higher at 83.26, it shed gains pressured by dollar demand from local oil companies and importers, a foreign exchange trader at a private bank said.
Indian rupee posts best day in 2 weeks
Most Asian currencies edged higher aided by a drop in U.S. Treasury yields on Friday after Federal Reserve Chair Jerome Powell’s remarks bolstered bets that the central bank is done hiking policy rates.
“My colleagues and I anticipate that growth in spending and output will slow over the next year, as the effects of the pandemic and the reopening fade and as restrictive monetary policy weighs on aggregate demand,” Powell said.
The 10-year U.S. Treasury yield ticked up to 4.24% in Asia after plunging 10 basis points on Friday.
Fed rate cuts may start as soon as March, according to the CME’s FedWatch tool.
Meanwhile, Indian Prime Minister Narendra Modi’s Bharatiya Janata Party won the elections in three of the five Indian states that went to the polls recently.
This “bolsters expectations of political stability at the upcoming general elections… addressing earlier concerns that a weak showing at the state polls might have stoked a fiscally populist agenda in the coming months,” DBS Bank said in a note.
The wins could also help draw higher foreign inflows into Indian equity markets, analysts said.
While the positive cues may help ease pressure on the rupee, moments of strength are likely to stay shallow in the near-term, Apurva Swarup, a vice president at Shinhan Bank said.
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