Indian rupee lags Asian peers as NDF maturities, month-end dollar bids pinch

MUMBAI: The Indian rupee closed marginally weaker on Wednesday, lagging Asian peers, on dollar demand linked to maturing non-deliverable forwards positions and month-end importer demand, while positive cues from a broad-based decline in the greenback capped losses.

The Indian rupee ended at 91.7825 per dollar, 0.1% down from its close at 91.72 in the previous session.

The currency has weakened about 2% so far this month, making it the worst performer among its Asian currencies, as investors continue to fret over persistent foreign portfolio outflows from equities. Outflows have already touched $4 billion in January.

INR “continues to be very flow-dependent and is showing little sensitivity to global cues,” a foreign bank trader said.

Unless the underlying flows across hedging activity and investments turn supportive, staggered depreciation will likely persist, the trader added.

On the day, intermittent dollar sales from state-run banks and likely central bank presence in the non-deliverable forwards market helped limit the currency’s losses, according to traders.

Most Asian currencies, meanwhile, were up between 0.1% and 0.9% while the dollar index struggled to meaningfully bounce back from a four-year low hit in the previous session after President Donald Trump brushed off its recent weakness.

“The move looked to be driven by FX decision-makers – be the asset managers hedging U.S. risk or the speculative community (hedge funds and CTAs) adding to short-dollar positions on range breakouts,” analysts at ING said in a note.

Global markets will now hone in on the U.S. Federal Reserve’s monetary policy decision, due later in the day.

While there is no change expected in benchmark borrowing costs, the focus will be on commentary from Fed Chair Powell regarding the future interest rate trajectory and the ongoing challenges to the independence of the U.S. central bank.