By Jaspreet Kalra
MUMBAI, – Sustained corporate dollar demand ran into likely intervention by the Reserve Bank of India on Tuesday, leaving the Indian rupee trapped in a narrow range and speculative interest muted.
The rupee was at 95.70 per dollar as of 10:50 a.m., little changed on the day and lumbering in an under-5 paisa range.
“There is no room to initiate fresh positions given the tight ranges,” a trader at a Mumbai-based bank said. A sizeable rupee jump could attract fresh short positions but that doesn’t appear to be on the horizon soon, he added.
Persistent interventions by the central bank have sapped the currency’s volatility over the last two weeks.
“As long as geopolitical tensions persist, the RBI may prefer to use incoming dollars to build reserves and reduce its outstanding forward position rather than allow a sharp appreciation in the rupee,” said Amit Pabari, managing director at FX advisory firm CR Forex.
The central bank’s inflow-boosting measures have garnered nearly $73 billion between June 8 and August 21, helping lift forex reserves to striking distance of their record high.
Meanwhile, Indian equities dipped on Tuesday, tracking weakness in regional stocks as investors assessed tensions in the Middle East and the impact on oil supplies.
Pakistan and Iran made “significant progress” in talks that focused on the U.S.-Israeli war on Iran and a path to peace, Pakistan’s interior minister said on Tuesday, at the end of a visit to Tehran.
Iran has also promised to retaliate against expanded U.S. economic sanctions that the Americans said would cut off Iran’s economic lifeline. Brent crude oil futures were last a tad higher at $92.3 per barrel.
Asian currencies were mostly rangebound while the dollar index drifted higher to 99.
U.S. Federal Reserve Chairman Kevin Warsh’s debut speech at the annual Jackson Hole conference this week will also be in focus as investors pay attention to his remarks about the recent surge in long-tenor bond yields.
(Reporting by Jaspreet Kalra; Editing by Rashmi Aich and Janane Venkatraman)
