Rupee to faces challenges amid equity outflows, pressured Asian currency markets

Rupee to struggle: The Rupee is expected to face challenges on Wednesday, influenced by foreign capital outflows from the nation's equity markets and the overall weakness in Asian currencies. 

Non-deliverable forwards suggest a slightly weaker opening against the US Dollar compared to its previous close of 83.15.

Forecasts indicate a day with minimal movements, with a marginal bias favoring the upside for the USD/INR pair. 

A foreign exchange trader noted that recent price action, flow patterns, and the order book contribute to this outlook.

Recent data from the National Securities Depository reveals that foreign investors withdrew $2.8 billion from Indian equities between last Wednesday and Saturday. 

Additionally, provisional data from Tuesday's session reported an outflow of $375 million, primarily attributed to the selling of HDFC Bank shares following disappointing results.

Before this period of outflows, foreign investment flows in January were predominantly positive. 

The Rupee, like other Asian currencies, is also grappling with a strengthening US Dollar, fueled by uncertainties surrounding potential interest rate cuts by the US Federal Reserve in the coming quarter.

Although a rate cut was not anticipated at the upcoming meeting, doubts have emerged about a reduction in March. 

Recent strong US economic data and resistance from Fed officials have contributed to a decrease in the likelihood of a March rate cut. 

ANZ noted "growing uncertainty" regarding the Fed's decision.

Asian currencies, as a whole, experienced a decline ranging from 0.1 per cent to 0.6 per cent on the day. 

Attention is now shifting to the first estimate of US gross domestic product for the fourth quarter on Thursday and the Personal Consumption Expenditures index (PCE) for inflation on Friday.

(With Reuters Inputs)