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Indian rupee largely flat as dollar index falls to two-month lows

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MUMBAI, Nov 20 (Reuters) – The Indian rupee remained relatively unchanged on Monday despite the dollar index falling to its lowest level in more than two months on continued demand for dollars from importers.

At 10:40 a.m. Indian Standard Time, the rupee stood at 83.2675 against the dollar, slightly above the previous session’s close of 83.27.

Asian currencies, including the offshore yuan and rupiah, gained more than 0.5 percent, while the dollar index fell to 103.6, its lowest level since early September.

The dollar weakened as weaker-than-expected economic data released last week led market participants to believe that further tightening by the Federal Reserve was less likely.

Indian rupee largely flat as dollar index falls to two-month lows

While the weaker dollar may provide some support to the rupee, traders expect the currency to continue to trade in a narrow range. The rupee has remained in the range of 82.70-83.40 since early September.

Forex traders at a state-run bank noted that a weaker dollar, lower oil prices and equity market-related inflows could provide appreciation opportunities for the rupee. However, the rupee’s gains will be limited unless local demand for the dollar eases, they added.

Initial public offerings (IPOs) worth about $900 million are expected to hit the Indian market this week. In addition, the MSCI index movement, which comes into effect on November 30, is likely to attract inflows of $1.5 billion.

Anand James, chief market strategist at Geojit Financial Services, sees the rupee continuing to fluctuate within a frustrating range of 83-83.30. If 83.30 stays firm, the rupee could fall towards 83.19, he said.

Investors are now waiting for the minutes of the October meeting of the Federal Reserve to be released on Tuesday, which could provide further information on the Fed’s future interest rate policy.

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