The rupee closed at 83.9725 versus the US dollar on Monday, as against its last close of 83.955 versus the US dollar, LSEG data showed. The currency was trading in a tight three paisa range of 83.95 and 83.97
The RBI likely sold dollars to cap the weakness in the rupee and avoid the currency from touching 84.00/$1, traders said.
The US CPI data is set to be released Wednesday after market hours, where the expectation is 3%, according to market participants.
Weak employment data released recently in the US have raised concerns of a slowdown in the world’s largest economy, sparking a global wave of risk aversion and volatility in the emerging market currencies.A sharper-than-expected fall in US inflation would strengthen the odds of the Federal Reserve lowering interest rates, which in turn would lead to a weaker dollar index and bode well for emerging market currencies.“Whenever there are growth concerns in the developed market, the currency of the emerging market will be pressured due to risk aversion. These currencies will be pressured until there is stability in the US from a growth perspective”, said a currency trader from a public sector bank. Crude oil prices also rose marginally to $80.32 per barrel on Monday, from $79.14 per barrel on Friday, according to Reuters due to uncertainty in the middle east.
A rise in crude oil prices poses upside risks to India’s trade gap and inflation as the country is a major importer of fossil fuels.
Market participants are pricing in about a 100 basis point rate cut by the US Federal Reserve starting next month, according to CMEs Fed watch tool.
Indian consumer price inflation data is expected today after market hours, which is expected to have eased to 3.65% in July, according to a Reuters poll.
