Key Takeaways
- Indian rupee ends the day nearly unchanged at 94.9250.
- Stock market slump and importer demand for dollars weigh on currency.
- Focus shifts to US midterm elections and Reserve Bank of India policy meeting.
The Indian rupee closed the day nearly unchanged, at 94.9250, after a modest early gain was erased by a slump in the local stock market and increased demand from importers for dollars.
The Nifty 50, India’s benchmark stock index, fell over 1%, with heavyweights in the information technology and financial sectors, heavily owned by foreign investors, contributing to the decline.
Traders noted that importers’ demand for dollars, despite a 2% drop in Brent crude oil prices, continued to exert downward pressure on the rupee.
US President Donald Trump’s decision to waive some sanctions on Russia led to a decline in oil prices, but this did not significantly impact the rupee’s performance.
US Secretary of State Marco Rubio stated that the president will use up to 60 days to assess the impact of the sanctions and tariffs on the global economy, with market focus turning to the upcoming US midterm elections.
The looming possibility of renewed conflict in the Middle East is expected to keep market sentiment cautious in the near term, according to traders.
Investors are now looking forward to the release of the minutes from the Reserve Bank of India’s October policy meeting, where the central bank raised interest rates for the first time in four years.
ANZ expects a 25 basis point hike in December, but persistent foreign exchange pressure could raise the probability of a 50 basis point hike or a combination of a 25 basis point repo hike and an increase in the Marginal Standing Facility rate to widen the policy corridor.
