- The USD/INR stabilized after RBI intervention halted a sharp rupee selloff.
- Despite calm trading, dollar demand persists as markets test the central bank, with global risks and Fed policy supporting a buy-the-dip outlook.
During the trading session on Thursday, we have seen a bit of stabilization in the US dollar against the Indian rupee after Wednesday had seen the Reserve Bank of India intervene in the currency markets as the rupee was being eviscerated. At one point, it was trading at 91.40 rupees, which, of course, is a fresh new low. Quite frankly, the Indian rupee has been falling apart for some time.
And it just seems like the Reserve Bank of India finally lost its sense of humor. That being said, it is worth noting that the Thursday session was very calm and stable as the bounce from the 90 rupee level on Wednesday seems to have held. In other words, people are still buying dollars, challenging the Reserve Bank of India. And these kinds of moves do happen.
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Central Bank Intervention and Market Response
Quite frankly, after a central bank gets involved, most of the time, the market will challenge them. And that looks to be exactly what they are doing right here. The financial situation in India, of course, is much weaker than that of the United States. And despite the fact that inflation was cooling a bit in the United States, at least in comparison to expectations, the reality is that the Federal Reserve is likely to remain at least somewhat stagnant in its interest rate cut cycle, and that will keep a bit of a bid in the US dollar.
Plenty of geopolitical issues and overall global demand fears are out there as well, which also puts a bit of a bid in the US dollar. Ultimately, this looks like a buy on the dip type of scenario. And with that being the case, this has to be looked at as a pair that at least is trying to form a floor at the 90 level.
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