Rupee poised to open steady at 83.35 against USD, anticipating RBI likely to keep rates unchanged at 6.50% shortly. Potential dovish tone expected from RBI, aligning with global trend of easing monetary policies.

Day range expected between 83.25 to 83.45, with pressure on the rupee likely if RBI leans towards lower rates narrative.

The Indian rupee experienced a marginal dip last Friday, settling at 83.3850 against the U.S. dollar, marking a modest 0.1% weekly loss.

Throughout the week, its movement hovered between 83.26 and 83.40. Meanwhile, the dollar index strengthened last week, buoyed by better than expected U.S. job growth data for November.

As we approach year-end, this week holds significance for FX market with major central banks, including the Federal Reserve, European Central Bank, and Bank of England, convening to determine their rate stances on December 13 and 14.

Prior to these meetings, Tuesday brings the release of U.S. CPI, with futures suggesting a just under 50% probability of a Fed cut in March, favoring the dollar.

From a technical standpoint, the rupee may test new lows. The anticipated weekly range is poised between 83.15 to 83.60.

The rupee closed the past month with a slight 0.1% dip, reaching a record low of 83.39 against the dollar. High demand for the dollar domestically hindered potential rupee gains, despite a weak global dollar trend. The USD/INR exchange rate is hindered by a supply-demand imbalance in the inter-bank, making a significant rupee surge unlikely. Importers are expected to act defensively around 83.10-83.15, anticipating year-end pressures.

Meanwhile the dollar index moderately rebounded from a three-month low, spurred by a drop in the euro after lower-than-expected November inflation in the Euro-zone. The recent trend sees the rupee falling with a rising global dollar, contrary to previous patterns.

Looking ahead, the focus is on the RBI December policy outcome on December 8 and the FOMC rate guidance on December 13. The RBI is likely to maintain its 6.50% repo rate, prioritizing inflation control amid a robust domestic economy. Rising food prices are fueling renewed inflation concerns. The central bank may need to sustain high rates to meet its 4% inflation target. Watch for any announcements to improve the rupee forward curve for potential revival.

Closing the year, USD/INR faces resistance at 83.40-50, with initial support at 83.15-20 and stronger support at 83.00-05 amid sustained dollar demand in the inter-bank.