Indian rupee sags alongside local stocks, tepid Asia FX also pinches

MUMBAI: The Indian rupee ended weaker on Monday as a fall in local equities and marginal slip in Asian currencies weighed on the currency, while traders remained cautious on speculative positions as the rupee settles into a fresh trading range.

The local currency closed at 90.07 per U.S. dollar, down 0.1% on the day.

Likely portfolio outflows from local stocks troubled the rupee on the day, traders said, while a pick up in exporter hedging and intermittent dollar sales from state-run banks helped keep a lid on its decline.

India’s benchmark equity indexes, the BSE Sensex and Nifty 50 fell about 0.7% and 0.9%, respectively amid mixed price action in regional equities.

Foreign investors have sold over $1 billion of local stocks on a net basis over December so far, putting the year-to-date outflows at nearly $18 billion. Both the rupee and equities have underperformed regional benchmarks this year.

The rupee is down about 5% this year, making it the worst performing currency in Asia. The Nifty 50 has risen over 9%, but the gain pales in comparison to the 25% jump in MSCI’s gauge of Asian stocks outside of Japan.

While foreign brokerages have incrementally turned positive on the outlook for local stocks, analysts reckon that the pressure on the rupee is likely to persist unless there is a breakthrough in U.S.-India trade talks.

A U.S. trade delegation is expected to visit New Delhi this week for talks, an Indian government source said last week.

Asian currencies were mostly on the defensive, with the Indonesian rupiah leading losses in the region while the dollar index was steady at 98.98 as investors awaited the U.S. Federal Reserve’s policy outcome on Wednesday.

“The Fed could be a positive event risk for the dollar in that it seems hard for the Fed to validate the 90bp of easing priced into Fed Funds futures by early 2027,” analysts at ING said in a note. The dollar index is down nearly 9% on the year so far.