Indian rupee closes nearly flat, modest depreciation bias lingers

MUMBAI: The Indian Indian rupee was little changed on Friday as pressure from weak local stocks and elevated interbank dollar demand met likely central bank intervention to defend the currency, traders said.

The Indian rupee closed at 90.6350 per dollar, down marginally from its close at 90.59 in the previous session. The currency was little changed week-on-week.

Maturity of positions in the non-deliverable forwards market added to the strain on the Indian rupee on Friday, alongside a risk-off mood in global equities weighed by lingering concerns over the impact of artificial intelligence and shrinking tech sector margins.

MSCI’s broadest index of Asia-Pacific shares fell more than 1% with India’s benchmark equity index, the Nifty 50 also down by a similar amount.

Regional currencies were mostly weaker as well, keeping the Indian rupee under pressure.

The Indian rupee “is back to the familiar pattern of steadily drifting lower while interventions keep the moves contained,” a trader at a Mumbai based bank said.

The currency’s relief rally after the U.S.-India trade deal has partly faded as corporate dollar demand stayed firm and some foreign investors remained cautious on a rebound in returns from Indian equities and bonds.

Concerns over large government borrowings and weak demand pushed bond yields higher, while equities lagged regional peers in the absence of clear AI bets.

“At this point, North Asian markets like China, Hong Kong, (South) Korea, and Taiwan look superior to India from earnings growth outlook, valuation, and dividend yield perspectives,” said Sat Duhra, portfolio manager at Henderson Far East Income.

In the near-term, investors will turn their focus to U.S. inflation data due later in the day, which is expected to influence expectations for the Federal Reserve’s rate outlook.