The Indian rupee was little changed on Wednesday as a drop in oil prices and strength in Asia currencies failed to budge the local unit in the face of persistent local U.S. dollar demand.
The rupee was at 83.25 against the U.S. dollar as of 10:18 a.m. IST, compared with its close of 83.2575 in the previous session.
Asian currencies rose, aided by a drop in U.S. yields after U.S. Federal Reserve officials struck a balanced note on Tuesday in their comments on inflation and the likely path of interest rates.
The 10-year U.S. Treasury yield fell 9 basis points (bps) on Tuesday and was last quoted slightly higher at 4.59%.
Brent crude oil futures dropped to their lowest level since late July on Tuesday as rising OPEC exports helped ease supply fears and Chinese economic data raised concerns about the country’s oil demand.
However, the rupee continued to have a muted reaction to the positive cues. “We had not reacted when oil price was up so there is a nullifying effect when they fall,” said Dilip Parmar, a foreign exchange analyst at HDFC Securities.
The Reserve Bank of India’s (RBI) interventions capped the rupee’s decline when Brent crude oil futures rose above $90 in October.
Continued dollar demand from local corporates and oil companies is maintaining pressure on the rupee, a foreign exchange trader at a private bank said.
The rupee is likely to stick to its prevailing range unless something changes dramatically, they added.
Overall, the local unit is expected to keep hovering near 83.25 over the coming month, according to a Reuters poll of 42 FX strategists. But more than 30% of the polled strategists still expect the rupee to touch a new low by end-January.
Investors now await remarks from Fed chairperson Jerome Powell who is slated to speak later in the day and may offer cues on the central bank’s policy trajectory.
