The Indian rupee is expected to hold near its all-time low on Thursday after the dollar index hit a near three-month-high on the prospects of a Donald Trump U.S. presidential win and bets that the Federal Reserve will cut rates at a prudent pace.
The 1-month non-deliverable forward indicated that the rupee would open at 84.0750-84.0850 to the U.S. dollar, compared with its close of 84.08 in the previous session and the 84.0825 lifetime low hit on Tuesday.
So far this week, the rupee has been in a less than 3 paisa range, with regular intervention by the Reserve Bank of India countering the jump in U.S. Treasury yields, the run higher in the dollar and equity outflows.
The rupee’s 10-day realized volatility has collapsed to less than 1%.
“(I) think the RBI is just making itself heard again that any depreciation (on the rupee) will be at the time they decide and the pace they decide,” a currency trader at a bank said.
“They will not allow other factors to decide the rupee’s direction.”
The rupee’s non-responsiveness to moves in Treasury yields and the dollar has meant that it tends to outperform its Asian peers when the greenback rallied and is an underperformer on declines.
The dollar index, on the back of resilient U.S. data and the increasing probability of a Trump win, is up 3.7% month-to-date. In response, most Asian currencies are down 3% to 4% this month, steeper than the rupee’s 0.2% decline.
The dollar index, on Wednesday, climbed to 104.57, the highest since July 30, and is on course for its fourth weekly advance. In October, the gauge has had just three down days, on the back of investors repricing the Fed expectations.
The Fed is not expected to repeat the 50 basis points rate cut it delivered in September.
