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Rupee’s Resilience: Despite a backdrop of weakening Asian currencies, the Indian rupee remained relatively stable on Wednesday. It closed at 83.22 against the U.S. dollar, just a slight deviation from the previous session’s closing rate of 83.23. This resilience was primarily attributed to the Reserve Bank of India’s (RBI) strategic intervention, involving the sale of dollars to prevent the rupee from plummeting to new record lows.

RBI’s Role: Traders noted that consistent dollar supply from India’s central bank played a crucial role in supporting the rupee. While the RBI was not engaging in aggressive dollar selling, it was seen offering the currency at levels between 83.23 and 83.24 through state-run banks, as confirmed by a foreign exchange trader at a state-run bank.

Asian Currency Weakness: In contrast to the rupee’s performance, most Asian currencies experienced declines against the U.S. dollar, with the Thai baht leading the losses with a 0.51% drop.

Dollar Strength: The dollar index (DXY) reached a fresh near 10-month high at 106.34 during Asian trading hours, driven by expectations of higher policy rates in the U.S.

Market Dynamics: Despite this resilience, the rupee did touch a low of 83.24 on Wednesday. It’s essential to note that the currency’s record low of 83.29 was recorded in October 2022. Importers, concerned about potential rupee depreciation, increased their hedging to safeguard against such fluctuations. Additionally, local companies contributed to month-end dollar demand.

Market Outlook: The rupee’s trading range between 82.80 and 83.30 remains intact, according to Gaurang Somaiya, a foreign exchange analyst at Motilal Oswal Financial Services. He believes that the rupee won’t experience a sharp decline until after the upcoming monetary policy decision in India, scheduled for October 6.

Key Decision Ahead: Investors will closely monitor whether FTSE Russell includes India in its emerging markets government bond index. The decision is expected on September 28.

Market Closure: It’s worth noting that Indian foreign exchange and debt markets will be closed on Thursday for a local holiday.

In summary, the Indian rupee’s ability to hold its ground amidst regional currency weaknesses can be largely attributed to the RBI’s measured interventions. Market dynamics, including dollar strength and impending decisions, will continue to influence the rupee’s trajectory in the coming days.