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Published: November 14, 2023
Updated: November 14, 2023

Rupee Resilience Amid RBI Support: Navigating a Week of Cautious Trading

In a holiday-truncated week, the Indian rupee demonstrated resilience, closing marginally unchanged as traders exercised caution amidst expectations of proactive measures by the central bank to stabilise local currency volatility.

Market Overview:

The rupee concluded at 83.3325 against the dollar, showing minimal deviation from the previous session's 83.34. Despite a technical system outage leading to a lifetime low of 83.42 on Friday, the Reserve Bank of India (RBI) intervened, reinforcing confidence among traders.

Central Bank's Role:

State-run banks continued to supply dollars in the spot market on Monday, prompting speculation about whether it was for clients or an RBI initiative. Experts highlighted that the rupee, since October, has maintained a range with record-low volatility—an apparent objective of the central bank.

Stable Outlook:

With sustained low volatility and opportunities for banks to initiate fresh positions, Parmar suggested the rupee could trade within the 83.00-83.60 range. As traders remain watchful, India's financial markets will be closed on Tuesday for a local holiday.

Global Factors Impact:

Investor attention now turns to the upcoming U.S. inflation reading scheduled for Tuesday. Anticipated to reflect a modest rise in headline prices, the core measure is expected to show a more substantial increase. Federal Reserve officials, including Chair Jerome Powell, have expressed uncertainty about whether interest rates are sufficiently high to combat inflation.

U.S. Policy Decision and India's Inflation:

The Federal Reserve's upcoming policy decision in December holds an 11% probability of a rate hike. Simultaneously, India is set to release October's headline inflation reading late on Monday, projected to be at a four-month low of 4.80%, according to a Reuters poll.

The rupee's resilience in the face of recent challenges, coupled with RBI support, underscores a cautious trading atmosphere. The intersection of global and domestic factors adds complexity, making market participants keenly observe unfolding events for potential impacts on currency dynamics. According to current trends, maintaining vigilance in this dynamic landscape is imperative for traders and investors alike.