The Indian rupee today broke its continuous falling streak and closed at 89.87, up 0.2% on the day against the US dollar. The local currency had opened on a low note at 90.12. As per a Reuters report, the currency rose to as high as 89.84 during trading sessions, but importers stepped in to cap further gains.
Rupee post mild recovery
The rupee, which has been one of the worst-performing Asian currencies of recent times, saw a slight recovery mostly attributed to weakness in the US dollar and a fall in the price of crude oil due to easing geopolitical tensions between Russia and Ukraine.
Further, expectations of a rate cut by the US Federal Reserve provided a cushion to the local currency. Commenting on the slight recovery in the rupee, Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities, said, “The rupee rose 23 paise to 89.82 as short covering emerged after a mild recovery in equities, while the dollar remained flat near 99. The RBI policy did not offer any direct support, with no visible intervention in the market. With the Fed’s final policy of the year due this week, volatility is expected to stay high. The rupee is likely to trade in the 89.75–90.25 range.”
Fed rate cut expectations and US trade talks to guide movement
The US delegation for trade negotiations, led by Deputy US Trade Representative Ambassador Rick Switzer, will start trade negotiations with India on December 10–11, which is likely to help provide some progress to the stalled India-US trade deal. The local currency, which had continuously breached the psychologically crucial 90-level mark against the dollar last week, had been on a depreciating spree due to the lack of a trade deal between both countries and constant outflow of foreign equities from the domestic markets.
The two major factors that will drive the Indian rupee are:
1. Whether the US Federal Reserve will cut rates, and
2. The outcome of the upcoming India–US trade talks and any possible tariff relief
