Kashmir Calm, Currency Charge: Is the Rupee Ready to Strike Back?

Image Source: CNBC TV18

The Indian rupee stands ready for a modest recovery at Monday's open, as the trader community heaved a collective sigh of relief as the weekend went by without significant escalations or headlines emanating from the Kashmir region. Following a frenetic and nervous Friday session, the lack of new news has alleviated near-term market tension, paving the way for a softer USD/INR.

Key Highlights:

Muted Opening Anticipated: The one-month non-deliverable forward indicates the rupee is likely to open flat or slightly firmer from its previous close of 85.45, following Friday's wild fluctuations spurred by concerns over India-Pakistan tensions.
Kashmir Relief: Market attention is still on Kashmir, where a militant attack last week had raised fears of escalation. With no major new developments over the weekend, traders anticipate some relief for the rupee and a fall in USD/INR at the beginning of the week.
Friday's Volatility: The rupee closed weaker at the end of last week at 85.45 against the dollar after geopolitical fears and a local equities sell-off led to caution in sentiment. The Nifty 50 lost nearly 1%, and bond yields increased by 4 basis points as investors prepared for possible conflict.
Forecasts Stable: Short-term projections have USD/INR oscillating within a tight range, with today's projected range being between 85.47 and 85.55. The pair is not expected to breakout unless there are fresh geopolitical shocks.
Market Watch: Market players will remain glued to any development or word coming out of Islamabad and New Delhi, but as of now, the absence of new newsflow is a good relief for the rupee.