Rupee strengthens for third consecutive day as dollar continues to weaken

Traders now eye the US Federal Reserve meeting outcome for further cues on dollar movement, said dealers

The rupee strengthened for the third consecutive trading session on Monday as the dollar index dropped further by 0.2 per cent to 103.5, hovering around the five-month low it hit last week. Dollar sales by exporters and foreign banks further aided the local currency, said dealers.

 

Dollar index measures the strength of the greenback against a basket of six major currencies.

 

The rupee appreciated up to 86.76 against the dollar during the day, a three-week high, before reversing some gains to settle at 86.80 per dollar, against the previous close of 87 per dollar.

 

Traders await the outcome of the US Federal Reserve meeting for further cues on dollar movement, said dealers. 

 

 

“I believe there’s also some intervention happening. The dollar index is moving in favour of the rupee. We need to keep an eye on the Federal Open Market Committee (FOMC). We’re expecting a pause from the US Fed, but it’s the dot plot we really need to watch for. The commentary will likely indicate a broad stance of 50 basis points, with two cuts expected this calendar year. So, the key things to focus on are the dot plot and the commentary,” said Anshul Chandak, head of treasury at RBL Bank.

 

Market participants said that the rupee is expected to maintain a steady trajectory, barring any unfavourable US economic data. Key US economic releases this week include retail sales, the US Federal Reserve’s policy meeting, and its subsequent statement.

 

“There is strong resistance at 86.60 per dollar mark, on the upper side, we see it below 87 per dollar,” said a dealer at a state-owned bank. “We are seeing inflows which are expected to sustain,” he added.

 

The rupee has appreciated by 0.8 per cent in March, so far, tracking the fall in the dollar index. However, in the current financial year, it has seen 3.91 per cent depreciation. In the current calendar year, the rupee has depreciated by 1.37 per cent.