By Jaspreet Kalra
MUMBAI (Reuters) -The Indian rupee rebounded on Tuesday, likely aided by early intervention from the central bank, a move echoing the Reserve Bank of India’s firm action in October that helped lift the currency from near record lows.
The rupee, which had hovered near its record low of 88.80 for three straight sessions, jumped to 88.42 on Tuesday, up 0.4%, after the Reserve Bank of India likely intervened in the non-deliverable forwards and spot markets, traders said. The currency was last quoted at 88.5850.
The central bank stepped in before the local spot market opened and the thin market liquidity amplified the impact of the central bank’s move, a trader at a Mumbai-based bank said.
The intervention is likely a “continuation of the RBI’s signaling a pushback against market expectations of a weaker rupee,” said Dhiraj Nim, an economist and FX strategist at ANZ.
“Nothing fundamentally has deteriorated in India’s economic outlook to warrant continued weakness in the currency and the central bank is likely to keep defending the 89 level at least till the time there is clarity on the outcome of U.S.-India trade negotiations,” Nim said.
While Indian officials have pointed to ongoing negotiations with Washington, a lack of clarity on the outcome has remained a drag for the currency which has weakened 3.5% year-to-date and 5% since U.S. President Donald Trump won the U.S. elections last year.
Elsewhere, the dollar index was perched near a 3-month high, boosted by a trimming of wagers on rate cuts by the U.S. Federal Reserve while Asian currencies were mostly weaker.
India’s benchmark equity indexes, BSE Sensex and Nifty 50, were both down 0.2% on the day, tracking declines in regional equities.
(Reporting by Jaspreet Kalra; Editing by Rashmi Aich and Nivedita Bhattacharjee)
