Indian rupee opened at 89.07 against the US dollar, up 0.2% from the previous close of 89.23. On Monday, the rupee settled at 89.23 after having plummeted to its lowest intraday session on November 21 at 89.65 against the American dollar, incurring a loss of 93 paise from the previous close.
After allowing the rupee to slice through the heavily defended 88.80 level on Friday, the RBI demonstrated on November 24 (Monday) that it would not tolerate much further weakness.
Rupee outlook
Bankers said the central bank stepped in before the market opened, sending an early signal that Friday’s price action would not be allowed to snowball.
“Monday felt like a message. The RBI will not allow the market a free run beyond 88.80,” said a currency trader at a private bank.
“They were in early and made sure the tone changed to an extent at least.”
The reassertion of the central bank’s presence on Monday reminded traders that while the RBI may occasionally let the rupee decline, it remains firmly opposed to rapid depreciation.
Dipti Chitale, CEO at FX advisory firm Mecklai Financial, said that after the RBI’s intervention she expects the rupee to firm up in December and push back past the 89 handle.
Fed rate cut boost
Odds of a Fed rate cut this month climbed to nearly 85% after a series of dovish policy remarks. The job market is soft enough to warrant another quarter-point cut in December, Fed Governor Christopher Waller said on Monday.
His comments echoed those of influential New York Fed President John Williams, who signalled that U.S. interest rates could fall further without putting the Fed’s inflation goal at risk.
A week back the probability of Fed rate cut was closer to 40%, per CME FedWatch Tool.