Traders continue to bet on rate divergence; rupee remains sideways to bearish

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Key Points

The Indian Rupee showed some strength at the start of June, although historical trends suggest a bearish outlook, and Indias forex reserves have declined for two consecutive weeks, reaching $589.14 billion...

The Indian Rupee started June on a positive note but the historical trend doesnt support the strength as 7 out of the last 10 years remained bearish with an average depreciation of 1.17%..

The revaluation of dollar assets and ease in liquidity condition dragged the forex kitty lower in the last two weeks but still up more than $10 from $578.45bn at March end.The overseas investors bought $5 billion worth of equities in the month of May, the biggest inflows after August 2022...

The dollar marked the biggest monthly gains in three amid worries over the US debt ceiling, hawkish fed member comments, upbeat economic data and haven buying..

Policy divergence is going to play out in June month as traders and investors are pricing in a pause from RBI and Fed while the ECB and BoE may continue raising interest rates...

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