Rupee to move in 83.20-83.90 range as Fed rate cut expected to boost inflows, say experts

Indian rupee

The Indian rupee is expected to trade in the 83.20-83.90 range against the dollar on expectation of inflows after the Federal Reserve cut rates and widening of interest rate differential between the United States and India, money market experts have said.

“Expected broader range play for USDINR is 83.20-83.90. Widening of interest rate differential between US and India may attract more flows to India in the coming months,” said Kunal Sodhani, Vice President, Shinhan Bank.

On September 23, the home currency closed at 83.5525 against the US dollar.

Dilip Parmar, research analyst at HDFC Securities, said the rupee market would monitor domestic inflation, global commodity prices, interest rate differentials, foreign fund flows, the outcome of the US elections and central bank interventions going ahead.

“These elements will play a critical role in shaping the market and currency movements,” Parmar said.

Since the start of this year, the rupee has remained volatile due to various domestic and international cues. These includes central bank’s intervention in the market, uncertainty after the rate hike by Japan, weakening Chinese yuan and the worsening of the West Asia crisis.

The rupee has depreciated over 30 paise year-to-date (YTD), Bloomberg data shows.

The reasons for depreciation have been the trade deficit number, which came in at 10-month high at $29.7 billion with imports surging to all the time highs of $64.4 billion, while gold imports also rose sharply to $10 billion, Sodhani said.

Despite the depreciation, the rupee remained fairly insulated from the sharp fall due to the central bank's dollar accumulation strategy. However, this approach has caused the currency to underperform in the current quarter, though it has maintained a middle-of-the-road performance year-to-date, Parmar said.

The Reserve Bank of India’s (RBI) intervention has led to India’s forex reserves growing more than $60 billion, so far, this year. India’s foreign exchange reserves stood at $689.458 billion as on September 13, the bank's data shows.