Indian rupee and the US dollar pair started the day on a quieter note, oscillating between 61.45 and 61.55 on spot. Bunched up inflows during the first couple of hours kept the pair pressured and it drifted lower, but US dollar did not linger much below 61.50 levels, as oil marketing companies stepped in to buy the currency.
Once the European session got under way, we saw large bids surface from a couple of large importers, which was aided by demand from PSU banks. The demand combined to push the pair above 62.75 on spot. Low hanging stops were triggered, as speculators were forced to cover their US dollar short positions. Indian rupee touched a high of 62.93 against the US dollar before closing around 62.88/89 on spot.
Currencies across the EM and Asian region remained on offer and the trend of depreciation has been in motion over the last few weeks. However, substantial inflows in the debt segment, amounting to over USD 3 billion over the month of January has cushioned Indian rupee and not allowed it meet the fate that has befallen on its peers across the region.
In the economic news, German investor confidence unexpectedly fell for the first time in six months, signalling caution over the outlook for the euro area’s economic recovery. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months in advance, slid to 61.7 in January from a seven-year high of 62 in December.
Tomorrow the data docket is full with Bank of Japan monetary policy, employment report from UK and the minutes of the last monetary policy meeting of the Bank of England.
Indian rupee against US dollar can remain within a range of 61.75 and 62.15/20 on spot over the near-term, with 61.00 and 63.00 being the larger range.
NOTE: The views expressed are those of the author.