By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee was in a narrow range against the U.S. dollar on Wednesday ahead of the Reserve Bank of India’s policy decision.
The rupee was at 82.6800 to the dollar by 09:50 IST, compared with 82.70 in the previous session. The local currency has been a five paisa range so far. On Tuesday, the rupee was in a 82.63-82.80 range.
There could be a repeat of these quiet days in the wake of the significant 82.80-83.00 support for the rupee, a trader at a Mumbai-based bank said. It is unlikely that the RBI policy will throw up a surprise that could take the rupee below that support, the trader added.
More than three-quarters of economists, 40 of 52, expected the RBI to deliver a 25-bps raise, according to a poll conducted between Jan. 13-27. The remaining 12 predicted no change in rate.
Economists expect the RBI to signal a pause to the rate hike cycle in light of the fall in the inflation rate. Barclays expects India’s inflation rate to remain below 6% for the third straight month in January.
With the rate hike well factored in, rupee traders would be interested in the path down, whether the RBI will pause, Amit Pabari, managing director at CR Forex, said.
We don’t expect USD/INR to break 83.00-83.25, considering the possibility of RBI intervention, Pabri added. The RBI has defended the 83 level for the rupee repeatedly in December.
The rupee forward premiums were little changed with the 1-year implied yield hovering near 2.11%.
Other Asian currencies were mostly higher after Federal Reserve Chair Jerome Powell doubled down on statements last week that disinflation had begun, pointing to chances of significant declines in inflation this year.
Some market participants had expected Powell to take a more hawkish tone following a robust U.S. jobs report.
(Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)
