Rupee Weakens Slightly To 82.38 As Dollar Dominates Early Trade Moves

The rupee fell on Tuesday as the dollar dominated early trade moves driven by risk-off sentiment, but investors will eye the Reserve Bank of India's resolve to limit any exacerbated decline in the domestic currency as it did in the previous session, and a decline in oil prices also likely to help.

According to Bloomberg, the rupee was last changing hands at 82.3750 after opening at 82.3325, with the currency trading in a tight range of 82.3313 to 82.3862 in early trade.

In the previous session, the rupee closed almost flat at 83.32 per dollar, helped by the RBI's intervention after the currency opened at a new record low for the second straight session and fell to an all-time low of 82.6950 against the greenback in early trade, following a US jobs report on Friday that firmed bets of more aggressive rate hikes.

The rupee strengthened from its new record low of 82.70 to about 82.40 in the space of about ten minutes after the Indian central bank sold dollars via state-run banks on Monday.

"The RBI sold more than a billion dollars yesterday to protect a fast depreciation in the rupee, allowing some respite to importers who could start panicking after a fall of 10.50 per cent In the domestic currency's value this year," said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.

"The range for the day is expected to be between 82.20 to 82.80 as Asian currencies fall from their recent highs. Markets await the US and Indian CPI (inflation) data. The US data may show a slight fall while the Indian data may show a rise," he added.

While traders expect the RBI to remain highly vigilant and responsive to any wild moves, they predict the broad trend of the rupee's decline to remain based on flight-to-safety bets.

The market is "still searching for a floor" for the rupee, and it looks like "we are not there yet", a Mumbai-based trader told Reuters.

"If the RBI does not intervene...then traders will remain long on USD/INR pair throughout the day", Ashish Ranade, Forex and Treasury Chief Manager at Cosmos Bank, told Reuters.

Tuesday saw a decline in Asian currencies while the dollar index edged up to 113.22, on track to post its fifth daily gain.

The dollar loomed large over fragile financial markets driven by expectations of an aggressive Federal Reserve rate outlook, rising recessionary risks in major economies and geopolitical tensions.

Meanwhile, oil prices, among the reasons the rupee has struggled, cooled off slightly. Brent crude was hovering near $96 a barrel, having climbed to $98.75 intraday on Monday.