Rupee may cling to subdued rhythm, improved portfolio inflows lend support
The Indian rupee is poised for another subdued trading session on Tuesday with traders expecting the central bank to lean against pressure on the currency, while a modest pickup in portfolio inflows is also expected to offer support.
Sustained hedging demand from local corporates and intermittent maturities of derivative contracts are among the pressures the rupee continues to contend with alongside persistently elevated oil prices.
The rupee is expected to open in the 95.70-95.75 range, per traders, having settled at 95.7450 to the dollar on Monday.
Persistent central bank interventions have helped make the rupee among Asia's quietest currencies over the last two weeks, anchoring it a under 30 paisa range between 95.45 and 95.75.
"Any dips (on USD/INR) keep running into corporate bids while gains are firmly capped by the RBI. More of the same is likely in the near-term," a trader at a state-run bank said.
Improved foreign portfolio inflows have also been a soothing factor for the rupee. Overseas investors have net bought over $2.5 billion of Indian stocks so far in August, up from $2.1 billion last month and sustaining a reversal of 4 months' worth of chunky outflows to the tune of nearly $28 billion.
Elsewhere, Asian currencies were mostly range-bound. The U.S. dollar struggled to hold onto gains against major peers on Tuesday as investors parsed Washington's expanded Iran-related sanctions and renewed efforts to ease pressure on longer-dated Treasury yields.
U.S. Treasury Secretary Scott Bessent unveiled an expansion of sanctions against Iran on Monday, while CNBC reported that the U.S. Treasury could use part of its cash balance to buy back longer-dated bonds to ease borrowing costs.
"The broader macro picture is that with greater geoeconomic fragmentation, it seems rational for countries around the world to diversify their reserves, trade and financial linkages further to prevent themselves from being too reliant on any one system, including our current dollar-based one," MUFG said in a note.
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