Despite challenges stemming from oil prices, US yields, and portfolio outflows, the Indian rupee has maintained stability throughout October, displaying limited volatility. The Reserve Bank of India has played a pivotal role in minimizing volatility by frequently intervening in spot, non-deliverable forwards, and futures markets. The increase in long-term US yields is driven by supply and demand dynamics and anticipations of higher rates set by the Federal Reserve. Additionally, the fluctuations in oil prices have been influenced by the conflict in the Middle East.
In Mumbai, the Indian rupee maintained its trading within a tight range on Monday, showing resilience against challenges posed by oil prices, US yields, and portfolio outflows.
At 11:02 am IST, the rupee stood at 83.26 against the US dollar, showing minimal movement from its Friday closing rate of 83.2550.
Throughout October, the currency has largely traded within a specific range, and its volatility has reached historic lows.
Traders have noted that the Reserve Bank of India has played a vital role in maintaining this low volatility by consistent intervention in the spot, non-deliverable forwards, and futures markets.
An FX salesperson at a bank remarked, "Amidst US yields, oil risk, a robust dollar, and portfolio outflows, the rupee has essentially remained unchanged."
The trader added, "While one might argue that USD/INR should be significantly higher, it doesn't carry much weight when you have a determined central bank."
Long-term US yields are on the rise due to supply-demand dynamics and expectations of a sustained high-interest rate policy by the Federal Reserve. Foreign investor outflows from Indian equities have reached nearly $2.5 billion this month, triggered by higher US yields and volatility in oil prices caused by the Middle East conflict. The focus for the week is on the policy decisions of the Bank of Japan, Federal Reserve, and the Bank of England, with expectations that these central banks will maintain their current interest rate stances.
