The Indian rupee is anticipated to make slight gains at the market opening on Monday, as attention shifts towards the performance of the dollar index following last week’s sell-off and overall market flows.
According to non-deliverable forwards, the rupee is expected to start at approximately Rs22.37-22.376 against the UAE dirham, compared to Rs22.388 in the previous session.
This positive movement in the rupee is a result of its strongest weekly performance in over four months, attributed to a decrease in US inflation.
Market experts suggest that the lack of sustaining the drop below Rs82 for the USD/INR pair indicates a relatively calm week ahead.
The focus for the week will be on the dollar index and various market flows, including equity and importers.
At the start of the week, the dollar index remained just below 100, while Asian currencies experienced a decline following last week’s rally, indicating slightly lower risk appetite.
As Federal Reserve officials are in a quiet period ahead of the July 25-26 meeting, market attention will turn to US data releases this week. Retail sales and industrial production data are expected on Tuesday, followed by housing data on Wednesday and Thursday.
ING Bank noted that upcoming data is likely to indicate a softening growth narrative, but this is unlikely to deter the Fed from tightening policy again this month.
In other news, data released on Friday revealed that India’s merchandise trade deficit in June aligned with expectations at $20.1 billion. Barclays commented in a note that the monthly goods trade deficit is gradually returning to manageable levels around $20-22 billion.