The rupee opened flat on Tuesday after closing stronger in the previous session, as strength from foreign inflows was offset by a recovery in the dollar overseas, according to forex analysts.
The local unit opened at 85.13 against the US dollar, hovering near the psychological mark of 85. On Monday, the rupee had closed 24 paise higher at 85.14, marking its fifth straight session of gains.
“Questions over the US Federal Reserve’s independence have raised concerns over the credibility of the dollar,” said Kunal Sodhani, vice president, global trading centre at Shinhan Bank India. He pegged support for the rupee at 84.90, with resistance seen at 85.50. “Tariff uncertainties still continue to prevail, and the dollar index remains under pressure,” he said.
The dollar index was down 0.16% at 98.11, while Brent crude gained 0.51% to $66.60 per barrel in early trade. Oil prices rose as investors covered short positions, even as demand concerns lingered due to recession fears and ongoing trade tensions. “Both oil benchmarks dropped 2% on Monday on signs of progress in the US-Iran nuclear talks, easing supply concerns,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.
“Range for the rupee is expected between 85.00 and 85.50,” said Bhansali. He advised exporters to hold off on selling and recommended that importers hedge payables at around the 85.00 level.
“USDINR opened weaker at 85.22 after touching a high of 85.03 on Monday, which was nearly a month’s high,” said Bhansali. “Inflows into both debt and equity helped the rupee yesterday. Some short covering on the dollar is expected today.”
Bhansali also pointed to a drop in domestic bond yields, with the 10-year government bond falling to 6.32%, around 20 basis points lower than levels seen during the last RBI rate cut. He expects the rupee to trade in the 85 to 85.50 range for the day, and suggests that importers hedge near-term exposures, while exporters may wait for better levels.
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