Key Highlights
- The rupee had slid to an all-time low of 90.42 on Thursday before staging a recovery, helped by what one banker said was "natural" dollar selling.
- The banker said that the quick run higher on dollar/rupee to near 90.50 "likely convinced a section of exporters and probably a few speculative accounts that this was a good level to sell into." "In hindsight, a correction was clearly due," he added.
- "The question now is how long and to what extent this correction will run." Before Thursday's recovery, the currency had declined more than 1% and was on a six-day losing streak, amplifying concerns about the underlying demand-supply imbalance in dollars.
- The primary focus now shifts to the Reserve Bank of India's rate decision in a couple of hours, followed by a press conference, where the RBI chief is expected to be asked questions on the rupee's recent decline.
- The overnight index swap market is pricing in virtually no chance of a rate cut.
