The Indian rupee opened little changed against the U.S. dollar on Tuesday as market participants turn cautious ahead of RBI's policy meeting later this week, according to forex traders.
The local currency opened 1 paise lower at Rs 83.38 against the U.S. dollar on Tuesday, compared with Monday's close of Rs 83.37.
The rupee traded at Rs 83.39 a dollar as of 9:11 a.m.
Market participants largely expects the RBI to continue the status quo, according to forex traders.
The dollar index rose to near two week high on Monday tracking losses in the euro, which exerted pressure on the Indian currency. The dollar index rose as much as 0.6% to 103.85 on Monday whereas, the European unit declined 0.7% to 1.0804 against the U.S. dollar.
"Despite the Nifty reaching new highs, the Indian rupee seems to be out of step, trading near its all-time low. This discrepancy can be attributed to factors such as a 5-year low liquidity deficit causing RBI's restrained intervention in selling dollars," said Amit Pabari, managing director, CR Forex Advisors.
"The robust demand for dollars from oil and gold importers, leading to a widening trade deficit, has also confined the rupee to a narrow range of Rs 83.00-83.40. However, the increasing probability of a Fed rate cut, anticipated strong inflows, a decline in inflation to 4.87%, and the resilient stance of the RBI suggests that the rupee may not depreciate beyond Rs 83.45."
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