Rupee Opens Stronger Against Dollar On Likely RBI Intervention
Rupee strengthened by 14 paise to open at Rs 86.69 against the greenback.
The Indian rupee opened stronger on Monday. The local currency strengthened by 14 paise to open at Rs 86.69 against the greenback, according to Bloomberg. It had closed at Rs 86.83 on Friday.
"Rupee weakened to end at 86.91 after trading a 86.76 to 86.90 range...Rupee is likely to open stronger, in line with broad Dollar weakness, around 86.72 and trade a 86.55 to 86.85 range with sideways price action. The three month ATMF implied volatility cooled off to 3.90%. While the one month forward yield ended at 2.23%," according to Abhishek Goenka, founder and CEO of India Forex & Asset Management (IFA Global).
The Indian rupee remained relatively range-bound between 86.60 and 86.90. This resilience is likely due to the Reserve Bank of India’s intervention on both sides, that is, accumulating reserves at lower levels and selling forwards at higher levels to stabilise excessive rupee depreciation. As a result, India’s forex reserves saw a significant rise of $7.65 billion, reaching $638.261 billion for the week ending Feb. 7, said Amit Pabari, managing director of CR Forex Advisors.
However, ongoing foreign institutional investor outflows continue to exert pressure on the rupee. Additionally, the RBI’s decision to double its government securities purchase target to Rs 400 billion ($4.61 billion) could impact liquidity conditions, influencing the rupee’s trajectory. On top of that, potential tariff tensions from the Trump administration towards India remain a key risk factor, he added.
Rupee is expected to trade within a broad range of 86.60 to 87.20. The 87.20 level is emerging as a strong resistance, while 86.50 is acting as a critical support zone. A breach of this will pave the way towards 86.00 levels, said Anil Kumar Bhansali, head of treasury and executive director of Finrex Treasury Advisors LLP.
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