MUMBAI, Sept 16 (Askume) – The Indian rupee was little changed on Monday as Asian currencies rose on dollar demand from oil companies and the possibility of a 50 basis point U.S. interest rate cut later this week.
At 10:25 am IST, the rupee was trading at 83.8925 against the US dollar, well down from Friday’s close of 83.8875.
The dollar index fell 0.2% to 100.8 on Monday, while Asian currencies gained, led by gains in the Malaysian ringgit and South Korean won, which rose 0.8%.
A foreign exchange trader at a state-owned bank said local oil companies have been “constant buyers of dollars” when the dollar-rupee exchange rate fell below 83.90.
Although the likelihood of further rate cuts by the Federal Reserve on Wednesday has increased, the impact on the rupee is likely to be minimal as the Reserve Bank of India (RBI) is unlikely to allow a significant rate hike, the trader said.
According to CME’s FedWatch tool, the probability of a 50 basis point rate cut on September 6 has increased from 30% to 57%.
Traders said improved portfolio flows are also negative for the rupee as the Reserve Bank of India may step in to absorb dollar inflows in recent sessions.
Foreign investors have bought more than $6 billion worth of Indian bonds and stocks so far in September, up from about $3 billion in August, according to stock depository data.
Amit Pabari, managing director at forex advisory firm CR Forex, said the weakness in the local currency’s prices was “mainly due to the continued intervention of the RBI on the buy side, which is reflected in the accumulation of reserves”.
As of September 6, India’s foreign exchange reserves rose for the fourth consecutive week , reaching a record high of $689.24 billion, central bank data showed .
