The rupee was trading in a narrow range against the US dollar in early trade on Wednesday amid a muted trend in domestic equities and strength of the American currency in the overseas market.
Forex traders said sustained foreign fund outflows also dented investor sentiments.
At the interbank foreign exchange, the domestic unit opened at 83.25 (Dh22.68) against the dollar and then touched an early high of 83.23, registering a gain of 4 paise over its previous close.
With most major central banks likely done with their policy tightening cycles, analysts said the dollar’s dream run over the past couple of years may have come to an end, putting less pressure on the RBI to intervene in currency markets.
Last month, RBI Governor Shaktikanta Das defended the regular use of its $586 billion in foreign exchange reserves saying it was necessary to prevent excessive volatility. The central bank sold about $23 billion in the last four months.
A near 70% majority of strategists, 16 of 23, who answered an additional question said RBI intervention would decrease over the coming year. The rest said it would increase.
“With a reversal of capital flows next year, the RBI’s intervention in the currency market should reduce,” said Suman Chowdhury, chief economist at Acuite Ratings and Research.
“Once you have a little more clarity on the Fed rate trajectory, U.S. Treasury yields are likely to come down further. If oil prices also don’t see any further escalation then we are expecting that the (rupee) rate will stabilise.”