MUMBAI: The Indian rupee drifted in a narrow band on Thursday, with traders pointing to activity from importers and exporters as the quarter draws to a close, while dollar-rupee forward premiums were steady near multi-month peaks.
The rupee was at 88.6250 against the U.S. dollar as of 10:30 a.m. IST, up slightly from its close at 88.69 on Wednesday.
The currency hit a record low of 88.7975 this week and has declined over 3% this quarter, on course for its biggest fall since the quarter starting April 2022.
Indian rupee ends flat as likely RBI intervention blunts drag from weak stocks
Headwinds, including steep U.S. tariffs on Indian goods and a recent hike in the H-1B visa fee, have pressured the rupee and analysts reckon that near-term depreciation may persist.
“The underperformance of INR is understandable given the negative implications from the new US H1B visa proposals for Indian corporates and continued foreign equity outflows,” Goldman Sachs said in a note.
India’s benchmark equity indexes, BSE Sensex and Nifty 50, were steady on Thursday but set for a 2% quarterly decline, diverging from a 9% gain in MSCI’s gauge for Asia shares outside of Japan.
Foreign investors have net sold $7.4 billion of Indian shares over the same period, hurting the rupee.
On Thursday, though, the rupee was drifting after hitting a record low earlier this week. Quarter-end dollar sales from exporters helped support the currency even as importers’ hedging demand capped gains, traders said.
RATE CUT CALLS
Citi on Thursday joined major firms including SBI, Barclays, Capital Economics, Nomura and MUFG in calling for a rate cut by the Reserve Bank of India on October 1.
While some economists expect a reduction, market pricing is yet to convincingly turn in that direction. The RBI’s decision is due following a rate cut by the Federal Reserve last week.
Dollar-rupee forward premiums were steady on the day, with the 1-year implied yield at 2.36%.
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