According to the latest monthly bulletin from the Reserve Bank of India (RBI), in the foreign exchange market, the rupee has begun to gain in July on the back of strong capital inflows, barring intermittent corrections, in spite of increase in the trade deficit and firming international crude prices weighing on the downside. Despite volatility triggered by spillovers over market expectations relating to the future course of monetary policy and a fluctuating US dollar (DXY), the rupee is trading in a tight range. Currency hedging costs have accordingly become lower than earlier. The euro is being reportedly preferred as the currency to fund long rupee carry trade.
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