MUMBAI, July 31 (Reuters) - The Indian rupee dropped on Monday and was poised to record a monthly decline on the back of a central bank that seemingly does not want the currency to appreciate much.
The rupee was at 82.2625 to the dollar by 11:02 IST, down from 82.2475 on Friday. The local currency is down 0.3% in July.
The rupee twice this month hit the 81.70-81.75 range, following which it had to contend with the Reserve Bank of India (RBI). The central bank bought dollars around that level via public sector banks to prevent the rupee from appreciating more, according to traders.
The RBI's determination offset the foreign equity inflows of more than $5.5 billion and a weaker dollar index.
With the RBI "not in a mood to relent," the rupee looks confined to an 81.70-82.50 range for the time being
The dollar index was down 1% in July amid expectations that the U.S. Federal Reserve rate cycle is over. Softer U.S. inflation readings have prompted investors to bet that this month's Fed rate hike will be the last.
"We suspect that further signs of a significant easing in the monthly core CPI (consumer price index) numbers for July and August will ultimately persuade the Fed to hold fire for the remainder of this year particularly," Capital Economics said in a note last week.
A rise in oil prices was cited another reason for the rupee's fall this month. Brent crude futures, up about 12.5% this month, are headed for their best performance in more than a year.
USD/INR forward premiums barely changed month-on-month, with the 1-year implied yield at 1.66% amid possible sell/buy swaps by the RBI and a dovish Fed outlook.
(Reporting by Nimesh Vora; Editing by Dhanya Ann Thoppil)
