Anna 
The Indian rupee faced depreciation on Tuesday in line with its Asian counterparts, as expectations of aggressive rate cuts by the U.S. Federal Reserve subsided. As of 10:00 a.m. IST, the rupee stood at 83.1225 against the U.S. dollar, marking a 0.07% decline from its previous close at 83.0650 on Friday. Indian markets were closed on Monday due to a local public holiday.
The dollar index showed a decrease, currently at 103.21, while most Asian currencies experienced a downturn. However, the offshore Chinese yuan defied the trend, rising nearly 0.3% on reports of China considering a rescue package for its struggling stock markets.
The Japanese yen remained relatively stable following the Bank of Japan’s decision to maintain its ultra-loose monetary policy in a closely watched announcement on Tuesday.
Forex traders anticipate the rupee to fluctuate between 83.05 and 83.20 on Tuesday, with routine dollar demand playing a significant role in influencing price movements, according to a foreign exchange trader at a state-run bank.
A reassessment of rate cut expectations in the United States is poised to limit near-term gains for Asian currencies, including the rupee. Strong U.S. economic data and resistance from Fed officials have prompted investors to scale back bets on significant rate cuts. Current market sentiment reflects a 56.5% probability that the Fed will keep rates unchanged in March, a notable increase from the 19% recorded on January 12.
Rupee forward premiums experienced a marginal decrease, with the 1-year implied yield falling by 1 basis point to 1.86%. Looking ahead, market analysts suggest that the rupee may witness further appreciation if it convincingly breaches the 82.80 mark over the medium term, according to Amit Pabari, managing director at FX advisory firm CR Forex.
Investors are also keenly observing the European Central Bank’s monetary policy decision scheduled for Thursday and the closely watched U.S. Personal Consumption Expenditure (PCE) inflation data set to be released on Friday. These events will likely play a role in shaping currency movements and market sentiment in the days ahead.
