Rupee ends flat; The RBI’s likely presence weakens corporate and interbank dollar bids

The Indian rupee ended little changed on Tuesday as periodic interventions by the Reserve Bank of India slowed the currency’s rate towards the psychologically important level of 91 per dollar.Tepid global risk sentiment and steady demand for hedging from importers have kept the currency lower even after it recovered from near record lows around 92 following the announcement of the India-US trade deal earlier this month.

The rupee closed at 90.6725 per dollar that day, virtually unchanged from its close of 90.65 on Monday.The currency fluctuated in a narrow band all day, pulled in opposite directions by continued interbank demand for dollars and the likely presence of central banks in the market, traders said.

The USD/INR is “unlikely to fall sharply anytime soon, but the path to and above 91 is also likely to take a long time,” said a trader at a state-owned bank.

Indian stock indices were slightly higher on Tuesday, following limited moves in regional stocks in festive trading thinned. Other Asian currencies were flat to modestly weaker, while the dollar index strengthened slightly.

GEOPOLITICS IN FOCUS

Markets were also in a cautious mood as indirect talks between the US and Iran aimed at resolving their long-running nuclear dispute started in Geneva. US President Donald Trump said he would be “indirectly” involved in the Geneva talks and that he believed Tehran wanted to make a deal.

“According to betting markets, the probability of a US attack on Iran by the end of March remains close to 40%. Further perceived escalations could lead to more support for the dollar coming through the oil channel,” ING analysts said in a note.

Representatives of Ukraine and Russia will also meet in Geneva on Tuesday and Wednesday for a new round of US-brokered peace talks.