By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee ended weaker on Tuesday, after having held in a tight range for most of the session as the U.S. dollar’s strength was offset, traders said, by the central bank selling the greenback to prevent the local unit from sliding further.
The rupee closed down 0.1% at 82.8275 per dollar. It weakened at open, on the stronger dollar, before settling into a narrow range.
The Reserve Bank of India selling dollars at around the 82.80 level was among the main factors preventing further weakness, traders said.
“The rupee is likely to be range-bound in the near term, with more downside than upside,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
In the near term, the rupee is unlikely to weaken beyond 82.90 as a fresh set of dollar sellers will emerge at that level, a foreign exchange trader at a state-run bank said.
Still, on the day, the rupee fared better than some of its Asian peers like the Thai Baht and Korean Won, which weakened by 0.37% and 0.73%, respectively.
Traders will now closely monitor U.S. inflation data and the RBI’s monetary policy decision, both due on Thursday.
The U.S. inflation figures, whether weaker or stronger than expected, will give a firmer handle on the possibility of another Federal Reserve rate hike.
And while most market participants expect the RBI to hold rates steady, its commentary is what will be crucial, with some investors betting on one more rate hike this year.
Bank of America forecasts a “hawkish hold” but expects another hike this year as the 4% inflation target is still elusive.
Just how hawkish the RBI’s decision sounds and the pace consumer inflation gathers may very well determine directional cues for a range-bound market, traders said.
(Reporting by Jaspreet Kalra; Editing by Swati Bhat and Savio D’Souza)
