Rupee hits 2-month high as dollar continues retreat

MUMBAI: The rupee was unable to sustain its gains above 81 per dollar on Monday but stayed near a two-month peak as the greenback remained subdued.
The rupee was at 81.03 per dollar by 10:03 a.m. IST, having earlier strengthened up to 80.89, its highest level since Nov. 14.
The currency closed at 81.12 on Friday, gaining for a second straight week.
The 80.90-81 zone was considered a resistance for the currency, but its near-term outlook was positive as corporate inflows were expected, dealers said.
“This week, we expect the USD/INR pair to trade in the tight range of 80.90-81.50 as traders are likely to eye the upcoming Federal Reserve meeting and India’s union budget (due Feb. 1) for fresh cues,” HDFC Bank economists wrote in a note.
The dollar index fell 0.3% as the euro climbed on hawkish comments by a European Central Bank member, combined with investors pricing in a lower terminal rate from the Fed.
Futures have priced in a smaller 25-basis-points (bps) hike at the meeting that concludes on Feb. 1 and expect rates to peak near 4.75% to 5.0%.
Softer US inflation, coupled with weak consumer and manufacturing data recently has prompted these bets. In 2022, the Fed raised rates by 425 bps, with the bulk in 75-bps increments.
US GDP and producer price index prints due later this week will be crucial to gauge how the economy was holding up just before the Fed meeting.
The lack of triggers from China, where markets are shut for the week-long Lunar New Year holiday, and no major domestic data releases would make investors look towards inflows into the equity markets, traders added.
This month so far, foreign investors have been net sellers of around $1.90 billion worth of Indian stocks.

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