Indian rupee remains stable on Thursday

The Indian rupee closed flat on Thursday, with the RBI’s intervention helping it withstand pressure from foreign banks’ dollar bids and weakness in Asian currencies before US inflation data.

Despite foreign investors withdrawing $7 billion from Indian stocks in the past eight trading sessions, the rupee has remained stable. State-run banks, possibly acting on behalf of the RBI, have been offering dollars in the market.

The US dollar and bond yields have been rising due to expectations of a less aggressive monetary easing cycle by the Federal Reserve. The 10-year US Treasury yield reached a peak of 4.08 per cent on Thursday, its highest since July 30.

As a result of bets on shallower Fed rate cuts and the RBI’s shift to a neutral policy stance, dollar-rupee forward premiums have declined. The 1-year implied yield is down 19 basis points so far in October, reaching its lowest level in a month.

Asian currencies were trading lower by 0.1 per cent to 0.4 per cent, while the dollar index remained close to its highest level in two months.

The dollar index is expected to rise further if the US core CPI surprises to the upside or if geopolitical uncertainty intensifies.

Attribution: Reuters

Subediting: M. S. Salama