Tepid global risk sentiment and steady hedging demand from importers have kept the currency tilted lower, even after it recovered from near-record lows around 92 following the announcement of the India-U.S. trade deal earlier this month.
The rupee closed at 90.6725 per dollar on the day, nearly unchanged from its close at 90.65 on Monday.
The currency lumbered in a narrow band through the day and was pulled in opposite directions by persistent interbank dollar demand and likely central bank presence in the market, traders said.
It is “unlikely that (USD/INR) will retreat sharply anytime soon but the path to, and above, 91 is likely to be drawn-out as well,” a trader at a state-run bank said.
India’s benchmark equity indexes were a tad higher on Tuesday, tracking contained moves in regional stocks in holiday-thinned trading. Other Asian currencies were flat-to-modestly weaker while the dollar index firmed slightly.
GEOPOLITICS IN FOCUS
Markets were also in a cautious mood as indirect talks between the U.S. and Iran aimed at resolving their long-running nuclear dispute kicked off in Geneva.U.S. President Donald Trump said that he would be involved “indirectly” in the Geneva talks and that he believed Tehran wanted to make a deal.
“The probability of a US strike on Iran by the end of March remains close to 40% according to betting markets. Further perceived escalations can lead to more support coming the dollar’s way via the oil channel,” analysts at ING said in a note.
Representatives of Ukraine and Russia are also scheduled to meet in Geneva on Tuesday and Wednesday for a fresh round of U.S.-mediated peace talks.
