MUMBAI: The Indian rupee is expected to open largely unchanged on Thursday amid foreign investors taking money out of equities post the election outcome and a broadly weaker dollar.
The 1-month non-deliverable forwards indicate rupee will open nearly flat from 83.37 in the previous session. On the back of likely intervention by the central bank, the rupee managed a recovery on Thursday.
“They (the Reserve Bank of India) sold quite a big amount yesterday, yet again telling the market that for now 83.50-83.55 is the ceiling (for dollar/rupee),” a currency spot trader at a bank said.
Indian rupee ends moderately higher
“All are looking at (Indian) equities, which recovered and offered one more reason to exit shorts.”
India’s Nifty 50 index climbed 3.3% on Wednesday, recovering more than half of the decline suffered on the vote counting day.
Foreign investors, however, remained wary of the election outcome, which put out a narrower mandate for Prime Minister Narendra Modi.
Foreign investors took out $678 million on Wednesday, having withdrawn $1.5 billion in the previous session. Meanwhile, Asian currencies were mostly higher and the dollar index dipped to near 104 amid risk appetite.
The increasing likelihood of a US Federal Reserve rate cut at the September policy meeting is helping risk assets.
The Bank of Canada trimmed its key policy rate on Wednesday, the first G7 country to do so.
The European Central Bank will likely do the same later on Thursday.
After Bank of Canada and the ECB, “could the Fed cut rates this year then Markets think so, with 2 rate cuts now being priced in,” MUFG Bank said in a note.
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