Rupee Inches Up as RBI Liquidity Snapshot Reveals Mixed Signals

Image Source : Global Finance Magazine

The Indian Rupee opened marginally stronger on July 17, trading at 85.9050 against the US Dollar, up 0.04% from its previous close of 85.94. The movement comes amid cautious optimism in currency markets, shaped by evolving liquidity dynamics and global inflation cues.

Key currency update:

The rupee traded in a narrow band between 85.74 and 86.05, reflecting restrained volatility.
Analysts expect the rupee to remain rangebound between 85.55 and 86.25 in the near term, citing tariffdriven US inflation and ongoing IndiaUS trade negotiations.

Liquidity and money market operations:

As of July 16, Indian banks held cash balances totaling ₹9.61 trillion with the Reserve Bank of India.
The government’s surplus cash balance with the RBI stood at nil, indicating no excess funds available for auction.
RBI’s refinance operations amounted to ₹58.63 billion, supporting shortterm liquidity needs.
Banks borrowed ₹879 billion via the Marginal Standing Facility, highlighting elevated overnight funding requirements.

Market sentiment:

The dollar index surged to a threeweek high, driven by strongerthanexpected US inflation data, which dampened hopes of nearterm Fed rate cuts.
Brent crude futures edged up to $68.9 per barrel, while foreign investors sold a net $91.8 million in Indian equities on July 14, adding pressure on the rupee.

Outlook:

With trade talks ongoing and inflation trends uncertain, the rupee’s trajectory remains sensitive to global cues and RBI’s liquidity stance.

Sources: Reuters, The Hindu, Moneycontrol, Economic Times, Goodreturns.