On Wednesday, the Indian Rupee closed higher, which was triggered by potential dollar investments into stocks, while traders are awaiting the outcomes of the monetary policy from the Reserve Bank of India (RBI), which will be announced on Thursday.
The Rupee closed at 82.5475 to the US dollar, which is higher than the previous session’s rate of 82.6050, indicating a favorable USD to INR exchange rate.
“The market is relatively calm ahead of the RBI’s policy decision,” said Dilip Parmar, a research analyst at HDFC Securities, adding that likely foreign investments into stocks helped the Rupee during the day. “The trend is still on the bullish side for the USD/INR pair,” Parmar noted.
Unless the central bank significantly deviates from expectations of maintaining the status quo on rates, the policy is unlikely to have a significant impact on the Indian currency, said Srinivas Puni, Managing Director at QuantArt Market Solutions.
The RBI’s policy will be followed by the outcomes of the U.S. Federal Reserve’s policy next week, which, according to analysts, will provide a forecast for the dollar. The dollar index remained stable at 104.01 on Wednesday.
The likelihood of a rate hike at the June 13-14 meeting has dropped to nearly 22% following weak data on manufacturing and services in the U.S. and relatively less aggressive comments by two Federal Reserve officials before the quiet period.
It’s important to note that the Indian Rupee, like any other currency, is subject to the influence of many factors, including economic indicators, political situation, and even global events. In this case, the anticipation of the decision on monetary policy from the Reserve Bank of India is a key factor influencing the Rupee’s rate.
At the same time, foreign investments into stocks also play a crucial role in strengthening the Rupee. When foreign investors invest in Indian stocks, they need to buy Rupees to make this transaction. This increases the demand for the Rupee and helps strengthen its rate.
However, despite the current strengthening of the Rupee, traders continue to remain vigilant as they await the outcomes of the monetary policy from the Reserve Bank of India. The bank’s decision on rates can have a significant impact on the Rupee’s rate as it reflects the country’s economic policy.
In conclusion, it can be said that the rate of the Indian Rupee continues to be influenced by various factors, and traders should remain vigilant to adapt to any changes in the market.