Rupee Steady as Importers Eye Currency's Mini-Recovery, Fed Rate Cut Expectations Subside

Rupee steady: The Indian rupee is anticipated to start the day with marginal fluctuations on Tuesday, driven by expectations that importers will capitalise on the recent modest recovery in the currency, coupled with speculation that Federal Reserve rate cuts are not imminent.

Forecasts based on non-deliverable forwards suggest that the rupee will commence trading at a level broadly similar to the previous session's close, which stood at 83.3625. The currency has shown signs of recovery from its all-time low of 83.5750, primarily supported by interventions from the Reserve Bank of India.

According to an FX trader at a bank, the USD/INR pair is likely to experience subdued movement for the time being, with importers potentially taking advantage of the current dip. The trader notes that a significant break below the 83.30 support level is likely after the release of key U.S. data later in the week.

In the broader Asian markets, currencies remained mostly rangebound, while equities witnessed a slight decline. Oil prices increased after a brief dip on Monday amid reduced concerns regarding the Iran-Israel confrontation.

Investor attention has shifted back to the timing and frequency of potential Federal Reserve interest rate cuts. Expectations had previously leaned towards fewer rate cuts this year due to higher inflation and robust economic growth. The release of crucial U.S. data throughout the week, including first-quarter GDP figures and March core PCE readings, will provide insights into the Fed's policy trajectory.

Consensus estimates anticipate a 0.3 per cent month-on-month increase in the core PCE reading for March. Analysts at ANZ Bank suggest that if idiosyncratic factors persist, indicating inflation stickiness, the Fed may delay action to gain greater clarity on the inflation outlook.

Key indicators for the Indian currency and global markets include one-month non-deliverable rupee forward rates at 83.42, onshore one-month forward premium at 7 paise, the dollar index at 106.06, Brent crude futures up 0.4 per cent at $87.3 per barrel, and the ten-year U.S. note yield at 4.62 per cent.

Recent data from NSDL indicates that foreign investors purchased a net $92.5 million worth of Indian shares on April 19, while selling a net $98.1 million worth of Indian bonds on the same day.

With Reuters Inputs