A weak dollar index, falling crude oil prices, and robust foreign portfolio investment (FPI) inflows have not deterred the Indian rupee from trading close to its all-time low. As of September 10, it closed at 83.98, having moved in a narrow range between 83.92 and 83.99 thus far this month. The rupee has remained rangebound due to probable interventions by the RBI.
Even after dropping from 103 a month ago to roughly 101.6, the dollar index is still weak. A weakening job market and decreasing inflation have led investors to anticipate that the Fed will begin reducing interest rates.
After falling 12% so far in September, the price of a barrel of Brent crude oil hit its lowest point since December 2021 on September 10 at USD 69.7. Demand-related worries are primarily to blame for the decrease.
Additionally, the 1.74 million bpd global demand growth estimate for 2025 has been dropped from the 1.78 million bpd estimate. The Gulf of Mexico supply issues surrounding Tropical Storm Francine are eclipsed by these demand concerns.
Net foreign portfolio inflows have been robust domestically in September thus far. Net foreign portfolio inflows as of September 10 were USD 4.1 billion, more than the USD 3.0 billion recorded for the entire month of August. Because India was included in the JP Morgan bond index, equities brought in USD 1.7 billion, and debt instruments brought in USD 2.1 billion.
US Consumer Price Inflation (CPI) data will be a major topic of discussion this week. It is anticipated that the statistics will support predictions of Fed rate cuts by demonstrating that inflation is still likely to decline stably toward the Fed’s 2% objective.
Shortly, we anticipate that the rupee will fluctuate between 83.60 and 84.10. Reduced oil prices, FPI inflows, and impending Fed rate reduction could all provide support. Nonetheless, the rupee may face pressure from importer demand. We anticipate that the RBI will act on both fronts as necessary to control any volatility in the rupee.
