Indian Rupee Forecast: Why It Will Trade at 88.5-89 Per Dollar Till November

The outlook, however, hinges on the US dollar's trajectory and US macro data on inflation and the labour market, which will influence the Federal Reserve's rate decision in December, the report from Bank of Baroda (BoB) said.

Any positive development on the US-India trade deal is likely to lift investor sentiments, the bank said, adding that concerns about higher US tariffs' impact on the domestic economy are weighing on foreign portfolio investor (FPI) flows.

Rupee remained steady in the last month, even though it continued to trade near a record low amid a stronger dollar, sluggish inflows and strong demand from importers.

The Reserve Bank of India (RBI) intervention was prevalent in the forex market to prevent the currency sliding to new lows, marking a notable shift from recent months' freer currency movement, the bank said, forecasting that trend to persist in the coming days.

Global currencies showed varied performance against the dollar in the last month, with emerging market currencies generally strengthening when advanced economy currencies weakened, the report said.

The dollar strengthened due to a growing consensus amongst market participants that the Fed is unlikely to cut rates again this year. The US Federal Reserve may take a cautious approach to further rate cuts due to a dearth of key economic data due to a prolonged US government shutdown, the bank noted.

The rupee traded in the range between 87.83 per dollar and 88.70 per dollar over the last month, with average annualised volatility falling from over 4 per cent in October to 1.2 per cent in November, the report noted.

- IANS