MUMBAI: The Indian rupee rose slightly on Tuesday but continued to underperform its Asian peers which have rallied to multi-month highs in anticipation of a US rate cut next month.
The rupee is the worst performing Asian currency so far this month, down 0.2% against the dollar, while its peers have risen as much as 4%.
On Tuesday, the rupee was at 83.83 as of 10:45 a.m. IST, up slightly from its close at 83.87 in the previous session.
The Indian currency had slipped to a record low of 83.9725 earlier this month.
Outflows from equities and dollar demand from importers, alongside unwinding of carry trades earlier in the month, have kept a lid on gains in the rupee even as its peers have risen.
Overseas investors have pulled out about $2.5 billion from Indian shares in August, according to stock depository data.
The rupee “faces persistent challenges — a widening trade deficit, ongoing foreign outflows, and relentless demand for USD from importers,” Amit Pabari, managing director at FX advisory firm CR Forex in Mumbai said.
But “with the Reserve Bank of India (RBI) firmly in control, the rupee is likely to remain within a narrow range”, Pabari said.
Routine interventions by the RBI helped the rupee hold above the psychologically-important 84 handle last week.
On Tuesday, the dollar index was at 101.9, hovering close to its lowest in seven months, ahead of remarks from Federal Reserve policymakers this week, including Chair Jerome Powell on Friday.
The remarks will influence expectations of the extent and pace of rate cuts by the Fed. Interest rate futures are currently pricing in about 93 basis points of US rate cuts over 2024.
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