USD/INR hits three-day lows near 71.50, focus shifts to RBI
- Rupee rises on foreign banks’ dollar sales, short-covering ahead of RBI.
- Renewed USD selling amid trade and growth worries also weigh.
The Indian rupee extends gains for the second straight day on Tuesday, as USD/INR retreats further from five-day highs of 71.87 reached last Friday. At the time of writing, the spot has managed to bounce off the 71.50 support and trades near 71.65 region, +0.10% on the day.
The recent strength behind the rupee is mainly induced by increased foreign banks’ dollar sales. According to a dealer with an Indian private bank, “Rupee is trading with a positive bias due to flows and weakness in the dollar index. We expect the range-bound move to continue for the rest of the session due to lack of any fresh cues for the day.”
Further, broad-based US dollar weakness, in the wake of negative US factory data and US President Trump’s concerns over a stronger dollar, collaborates to the downside bias in the pair. Also, a short-covering rally in the rupee cannot be ruled, as markets resort to profit-taking, with the two-day Reserve Bank of India (RBI) monetary policy review meeting commenced.
Markets now await the RBI monetary policy decision for fresh direction on the rupee. In the meantime, the US-China trade-related headlines and USD dynamics will continue to influence the currency.
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