Indian rupee slips but state-run banks’ dollar sales cushion decline

MUMBAI: The Indian rupee was on the defensive again on Friday, echoing price action seen during much of the week on tepid risk appetite, while dollar sales from state-run banks helped it hold above its all-time low of 88.80 per dollar.

The rupee weakened 0.1% to 88.6850 as of 10:00 a.m. IST, though on course for a modest weakly gain as the Reserve Bank of India’s frequent interventions offered support.

Asian markets were mostly weaker on Friday as well with tech-heavy equity indexes in Japan and Korea on course for their worst weekly drops since March as investors turned wary of the run-up in artificial intelligence stocks.

Overnight, the Nasdaq dropped 1.9% while Japan’s Nikkei was down about 2% in Asia trading.

India’s equity benchmarks, the BSE Sensex and Nifty 50 slipped about 0.7% each as well. The rupee, meanwhile, was supported by intermittent dollar sales from state-run banks which two traders said were most likely on behalf of the central bank.

“The RBI’s firm defence of the 88.80 level has established it as a strong resistance for USD/INR,” said Amit Pabari, managing director at FX advisory firm CR Forex.

A potential breakthrough in India–US trade talks could lift sentiment and push the pair below 88.40, he added.

US President Donald Trump said on Thursday his talks with Indian Prime Minister Narendra Modi were going well and that he would be visiting the South Asian country, as negotiations over trade continued.

Meanwhile, dollar-rupee forward premiums nudged up as money market traders added to wagers on a rate cut by the US Federal Reserve next month after data pointed to weakness in the country’s labour market.

The 1-year dollar rupee implied yield was last up slightly at 2.15%.