MUMBAI: The Indian rupee closed nearly flat on Tuesday, surrendering early gains as month-end dollar demand from importers offset broader strength in regional currencies.
The rupee ended at 89.22 against the U.S. dollar, barely changed from its close of 89.23 in the previous session.
The currency found its footing this week after slumping to an all-time low of 89.49 on November 21. While the central bank likely stepped in to shore up the currency on Monday, traders pointed to only intermittent signs of its presence in the market on Tuesday.
It “seems like they (RBI) are active but largely in the non-deliverable forwards market,” a senior trader at a state-run bank said.
Persistent worries over a limbo in U.S.-India trade negotiations have weighed on the rupee this year and traders reckon that a recovery is unlikely in the absence of a breakthrough in talks between New Delhi and Washington.
“We think the current elevated US tariffs on India exports are likely to be lowered, which will likely be positive for growth and equities, but we expect the RBI to replenish FX reserves on dips in USD/INR, therefore limiting INR appreciation,” analysts at Goldman Sachs said in a note.
India’s foreign exchange reserves stood at $692.6 billion as of the week ended November 14, per central bank data. The Reserve Bank of India’s net short position in FX forwards and futures, meanwhile, stood at $59.4 billion at the end of September.
Traders and analysts expect the position size to have risen further in October, the data for which is expected to be released on Friday.
Elsewhere, the dollar index was a tad lower at 100.1, while Asian currencies firmed between 0.1% and 0.7% as investors deliberated over the chances of a U.S. rate reduction next month.
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