On Monday, the Indian rupee reached its peak in nearly two weeks as the dollar index dropped to its lowest point in six months, leading to widespread increases in Asian currencies. By 11:10am IST, the rupee stood at 83.90 (Dh22.86), showing a slight increase of about 0.05 percent from its previous close at 83.94 (Dh22.87) on Friday. The local currency climbed to 83.85 (Dh22.84) during early trading, marking its highest point since August 6.
The dollar index decreased by 0.3 percent to 102.1, its lowest since mid-January, as investors looked ahead to a potentially dovish shift in the Federal Reserve's July policy meeting minutes, scheduled for Wednesday, and Chair Jerome Powell's comments later in the week. MUFG Bank noted that with US macro data indicating disinflation and continued resilience in growth, Powell might signal a stronger likelihood of rate cuts at the September FOMC meeting.
Although traders have fully anticipated a 25-bps rate cut by the Fed in September, the robust US economic data has diminished hopes for a 50-bps cut. Despite early gains, the rupee trailed behind other Asian currencies, which saw increases ranging from 0.3 percent to 1.5 percent. Over the past month, the rupee has fallen about 0.2 percent against the dollar, diverging from the general strength of its counterparts.
Traders attribute the rupee's underperformance to increased dollar demand from local importers and outflows from equities. Data shows that overseas investors have withdrawn $2.5 billion from local stocks so far in August. A foreign exchange trader at a private bank commented that unless there is a reversal in equity flows, the rupee is unlikely to surpass 83.80 (Dh22.83) due to the strong demand for dollars from importers in recent sessions.
