MUMBAI: The Indian rupee ended little changed on Thursday, as pressure spurred by outflows related to corporate debt repayments and routine importer hedging demand was capped by intermittent dollar sales by state-run banks.
The rupee closed at 89.3050 against the U.S. dollar, down marginally from its close at 89.27 in the previous session.
The rupee has stabilised after touching a record low of 89.49 last week, but traders and analysts say depreciation risks remain amid weak trade and portfolio flows and uncertainty around U.S.-India trade talks.
India’s benchmark equity indexes, BSE Sensex and Nifty 50, hit record highs on Thursday, but foreign investors have been net sellers of Indian stocks in November and so far this year.
Importer dollar demand and aversion to taking long positions on the rupee unless there are concrete developments on a U.S.-India trade deal are likely to keep weighing on the rupee, a trader at a private bank said.
Asian currencies, meanwhile, traded mixed. The dollar index drifted higher to 99.69 but was set for its worst weekly decline in four months as investors held on firmly to wagers that the Federal Reserve will cut interest rates next month.
Expectations were bolstered by dovish remarks by Fed policy makers earlier this week alongside benign U.S. economic data. The odds of a 25 basis-point rate cut are currently at 85%, up from nearly 40% last week, per CME’s FedWatch tool.
“We believe this week’s dollar correction has more to do with a convergence towards lower rates following the dovish Fed’s repricing, rather than any geopolitically-driven rotation away from safe havens,” analysts at ING said in a note.
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