By Gaurang Somaiya
Rupee traded in a narrow range following lack of cues on the domestic as well as on the global front. Globally market participants remained on the side-lines following Christmas and New Year holidays. Active intervention by the RBI could also kept the volatility in check for the rupee.
Latest data showed India FX reserves rose to the highest level in 21-months, added $4.47billion to reach at a total of $620.44 billion. This takes the YTD addition to forex reserves to over $57billion. Losses for the rupee has remained restricted after India trade deficit narrowed in November as compared to the previous month.
Broadly, the dollar is trading with a negative bias following expectations of rate cut announcement by the Fed in 2024. The greenback fell to the lowest level in five months against its major crosses. On the other hand, euro and pound both gained on back of broad weakness in the dollar.
Weakness in the dollar was triggered by weaker-than-expected economic number from the US. Data showed existing-home purchases held at a record low in November, indicating a weak resale market beset by a lack of inventory and high prices. Pending home sales fell 5.2% month-on-month, following a revised 8.2% drop in October to hold near record lows.
This week, volatility could increase for crosses on back of economic numbers that will be released from the major economies. Importantly, it’s going to be the manufacturing PMI numbers and employment data from the US.
Expectation is that manufacturing PMI could remain unchanged and non-farm payrolls data could also disappoint and could keep the dollar weighed down against its major crosses. The USDINR(Spot) is expected to trade sideways and quote in the range of 82.80 and 83.40.
(Gaurang Somaiya, Forex & Bullion Analyst, Motilal Oswal Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)
