The Indian rupee stood firm amidst a weakening trend among Asian currencies, thanks to the intervention of the Reserve Bank of India (RBI). As of 10:25 a.m. IST, the rupee was trading at 83.23, almost unchanged from its previous session’s close at 83.2425. This resilience came in the face of Asian currencies weakening due to higher-than-expected U.S. inflation data for September.
The U.S. Consumer Price Index (CPI) rose by 0.4% month-on-month, slightly exceeding expectations, with the closely watched core CPI increasing by 0.3%. In response, the RBI is believed to have sold U.S. dollars near the 83.25 level through state-run banks, a move consistent with their routine efforts to prevent the rupee from approaching its all-time low.
Foreign exchange traders anticipate that the RBI will continue to defend the 83.25 level against the U.S. dollar. While trading volumes have been low so far, the rupee’s range is expected to remain narrow due to local oil companies’ demand for the U.S. dollar, limiting any significant upside.
The U.S. dollar index remained relatively stable at 106.4, following an overnight rally driven by the unexpected rise in U.S. inflation. This data suggests that the U.S. Federal Reserve is likely to maintain higher interest rates for a longer period, instead of quickly declaring victory over inflation, according to analysts.
Dilip Parmar, a foreign exchange research analyst at HDFC Securities, noted that the RBI is determined to maintain a certain level for the rupee. However, the local unit may face additional pressure from foreign investors who continue to sell Indian equities. In October alone, overseas investors have sold Indian equities worth $966 million, adding to the $1.77 billion worth of sales from the previous month, as per NSDL data.