The modest rebound comes after the rupee lost more than 1% over the last six sessions and slipped close to the 95.50 level on Monday (July 6), its weakest level in about a month.
According to market participants, the rupee’s earlier recovery towards the 94-per-dollar mark, aided by lower crude oil prices and measures taken by the Reserve Bank of India (RBI) to attract dollar inflows, appears to have lost momentum.The currency has remained under pressure due to routine dollar demand from importers, expectations that the US Federal Reserve could still raise interest rates later this year, and arbitrage-related flows.
Meanwhile, the US dollar eased after a weaker-than-expected US jobs report for June reduced expectations of aggressive monetary tightening. The dollar index remained below the 101 mark on Tuesday, while most Asian currencies traded higher.Despite the softer dollar, the rupee has struggled to benefit.
“Normally, a softer dollar is exactly what the rupee needs to catch its breath. This time, it simply did not happen, and that is the part worth watching closely,” Mumbai-based CR Forex said in a note.
Traders also expect the RBI to continue intervening in the foreign exchange market to curb excessive volatility. The central bank has reportedly been selling dollars at various levels and may have intervened through state-run banks when the rupee neared 95.50 on Monday.
Market participants will now watch the minutes of the US Federal Reserve’s June 16-17 policy meeting, due on Wednesday (July 8), for fresh signals on the future path of US interest rates, which could influence the dollar and emerging market currencies, including the rupee.
-With Reuters inputs
