Rupee trades higher: The Indian rupee rose to its highest level in nearly two weeks on Monday, boosted by a drop in the dollar index to its lowest point in six months, which fueled broad gains in Asian currencies.
At 11:10 am IST, the rupee was trading at 83.90, up about 0.05 per cent from its previous close of 83.94 on Friday. It briefly touched 83.85 in early trade, its highest level since August 6.
He Dollar The index fell 0.3 percent to 102.1, its lowest level since mid-January. The drop was driven by expectations that the Federal Reserve could take a dovish stance in the minutes of its next July policy meeting, due out on Wednesday, and in remarks by Chairman Jerome Powell later in the week.
“Given the current US macroeconomic data showing disinflation and resilient growth, Chairman Powell could signal that the Fed could implement rate cuts at the September FOMC meeting,” MUFG Bank said in a report.
Traders have priced in a 25 basis point rate cut by the Fed for its September meeting, although recent US economic data has dampened expectations for a more aggressive 50 basis point cut.
Despite the rupee’s gains in early trading, it lagged other Asian currencies, which posted gains of between 0.3% and 1.5%. Over the past month, the rupee has depreciated by around 0.2% against the dollar. Dollardifferentiating itself from the overall strength of its regional peers.
High demand for dollars from local importers and significant capital outflows have limited the rupee’s gains. According to data from stock depositories, foreign investors have withdrawn $2.5 billion from Indian stocks so far in August.
“Unless there is a reversal in equity flows, the rupee may struggle to appreciate beyond 83.80 due to continued strong demand for dollars from importers,” said a currency trader at a private bank.
(With contributions from Reuters)
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