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Steady Indian Rupee Holds Ground Against UAE Dirham Amidst Slip in Asian Peers Triggered by Uptick in US Yields

The Indian rupee maintained its stability on Wednesday despite a downturn in Asian currencies, influenced by an increase in Treasury yields as traders adjusted expectations of potential U.S. rate cuts this year.

Subdued Movement and Dollar Index Surge

As of 10:15 a.m. IST, the rupee was at 83.33 (Dh22.7), showing minimal changes from its previous close at 83.3175. Meanwhile, the dollar index saw a notable 0.8% surge on Tuesday, accompanied by a rise in the 10-year U.S. Treasury yield to 3.94%.

Market Sentiment and Asian Currency Decline: Indian Rupee

Investors are currently estimating a nearly 75% likelihood of a Fed rate cut in March, down from around 85% a week earlier, according to CME Group’s FedWatch tool. Most Asian currencies experienced a decline, with the Korean won and Malaysian ringgit leading losses at 0.5% and 0.6%, respectively.

Market Observations and Anticipation of Rupee Movements

Traders noted “decent selling interest (for USD/INR) near 83.35,” with expectations of limited sharp movements for the rupee, anticipating intervention by the Reserve Bank of India (RBI) to curb losses.

RBI’s Dual-Sided Intervention and Limited Rupee Fluctuations: Indian Rupee

The RBI’s intervention has confined the rupee within a narrow range over the past two months. The central bank has prevented losses near the 83.40 handle while absorbing dollar inflows to restrict gains in the local unit.

Analyst Perspective and Potential Weakness

Analysts, including Dilip Parmar from HDFC Securities, suggested that “some weakness will be on the cards” for the rupee on Wednesday due to pressure on regional currencies.

Key U.S. Data and Fed’s Policy Meeting Minutes: Indian Rupee

Key U.S. data releases, starting with the ISM Manufacturing PMI data later in the day, are expected to influence investors’ expectations. Additionally, the minutes from the Fed’s December policy meeting, scheduled for release later on Wednesday, will provide insights into policymakers’ considerations regarding potential policy rate easing.

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