No Respite For Rupee As It Closes Flat Against US Dollar

The Indian Rupee closed flat at 85.64 against the US Dollar today, reflecting a day of cautious trading, influenced by various global and regional factors.

Amit Pabari, managing director of CR Forex Advisors, highlighted that Covid-related concerns in parts of Asia contributed to a cautious market sentiment. Additionally, firm global crude oil prices added to the downward pressure on the Rupee. "The possibility of the Reserve Bank of India considering a rate cut in its upcoming Monetary Policy Committee meeting has also kept the Rupee under pressure," Pabari noted.

Geopolitical developments further complicated the market outlook. Fresh tensions emerged after Iran’s Supreme Leader Ayatollah Khamenei dismissed hopes for a nuclear deal with the US. Reports suggesting that Israel might be preparing for a potential strike on Iran's nuclear facilities have also surfaced. "These geopolitical tensions could lead to a rise in oil prices, which would put additional pressure on the Rupee," Pabari added.

On the global front, the US 10-year yield has climbed, reflecting concerns over fiscal indiscipline and delayed monetary easing, which are driving up borrowing costs. Federal Reserve's Raphael Bostic delivered a cautious message, acknowledging that consumer balance sheets are not as strong as they were pre-pandemic and warning that further instability in the US Treasury market could increase uncertainty and delay policy actions.

Despite these challenges, the US Dollar Index showed signs of weakness due to poor fiscal prudence and a weak economic outlook, which could provide some support to the Rupee. "The current sentiments indicate a mixed outlook, but the weakness in the US Dollar Index might offer some relief to the Rupee," Pabari concluded.