Indian rupee finds muted relief from weaker dollar; corporate flows dominate

MUMBAI: The Indian rupee closed a tad weaker on Monday, unable to benefit from a broadly weaker dollar in the face of corporate demand for the greenback over a trading session that was also marked by technical glitches.

The Indian rupee closed at 90.7575 per dollar, down 0.1% from its close at 90.6550 on Friday.

Market participants had flagged issues with execution of trades on the interbank order matching system in early trading which were subsequently resolved, helping shore up trading volumes.

In the latter half of the session, traders observed two-sided corporate activity alongside dollar demand from some foreign banks.

Traders expect the rupee to hover between 90-91 per dollar near-term, while watching out for a sustained recovery in foreign portfolio flows and exporter hedging, which could allow the rupee to extend gains spurred by the announcement of a U.S.-India trade deal last week.

The day’s minor hurdles left the Indian rupee unable to benefit from a 0.2% decline in the dollar index while most Asian peers logged gains.

The yen strengthened on Monday after Japanese Prime Minister Sanae Takaichi swept to victory in Sunday’s election while the Thai baht was up sharply as well, following an election result.

“Barring a significant turn for the worse in risk appetite, it looks like we could see a down week for the dollar,” analysts at ING said in a note.

MSCI’s gauge of Asian shares was up over 2% while India’s stock benchmarks, the BSE Sensex and Nifty 50 rose 0.6% and 0.7%, respectively as well.

Pressure persisted in India’s bond markets though, with the yield on the benchmark 10-year crossing over 6.75% on concerns over heavy state debt supply and soured mood from the absence of any additional measures to provide liquidity support by the central bank in its monetary policy announcement last week.