The Indian rupee strengthened on Tuesday as the central bank's monetary policy was in line with market expectations and traders are now focusing on the outcome of the US Federal Reserve's policy statement due on Wednesday. The Reserve Bank of India raised interest rates for the second time in as many months, warning that inflation is likely to remain elevated despite sluggish growth, and rolled back an emergency measure put in place in July to support the rupee.
"The Fed policy review will be important to the extent of the details of the taper but otherwise I expect the rupee to remain in a broad range of 61.20 to 61.90 over the next two weeks," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank. The partially convertible rupee closed at 61.31/32 per dollar compared with 61.52/53 on Monday.
In the offshore non-deliverable forwards, the one-month contract was at 61.91 while the three-month was at 62.92. In the currency futures market, the most-traded near-month dollar/rupee contracts on the National Stock Exchange, the MCX-SX and the United Stock Exchange all closed at around 61.76 with a total traded volume of $1.7 billion.