Anna 
In the backdrop of global currency fluctuations, the Indian rupee exhibited minimal changes on Tuesday, holding its ground against the U.S. dollar as local demand for the greenback persisted. Despite the U.S. dollar index hovering near its lowest level in almost five months, the rupee maintained a steady stance, closing at 83.1650 against the U.S. dollar as of 9:50 a.m. IST, a marginal shift from its previous close at 83.14 on Friday.
While most Asian currencies experienced strengthening, with gains ranging from 0.2% to 0.5%, the dollar index remained relatively stable at 101.6 during Asia hours. However, the index had dipped to its lowest point since late July on Friday following U.S. inflation data that fell below expectations.
Dilip Parmar, a foreign exchange research analyst at HDFC Securities, commented that despite positive sentiments favoring rupee bulls, substantial gains are unlikely. He predicted that the local unit might fluctuate between 83.05 and 83.25 in Tuesday’s session.
The recent data on core personal consumption expenditure (PCE) inflation, the preferred inflation gauge of the U.S. Federal Reserve, revealed a 0.1% month-on-month increase in November, falling short of the 0.2% forecasted by economists. The year-on-year rise in the core PCE price index was 3.2% in November, marking the smallest increase since April 2021.
This data is anticipated to reinforce expectations of the Federal Reserve easing policy rates soon. Market indicators currently suggest a slightly less than 90% chance that the Fed will implement rate cuts at its March meeting, according to CME Group’s FedWatch tool.
Meanwhile, rupee forward premiums experienced a slight uptick, with the 1-year implied yield rising by 2 basis points to 1.77%. Analysts suggest that forward premiums may continue to rise in the near term, driven by the prevailing “paying bias” and growing expectations of Fed rate cuts, even as the Reserve Bank of India is expected to maintain an extended pause on its monetary policy.
