Rupee Gains on Strong Dollar Inflows, Bucking the Weakening Trend in Asian Peers
On Wednesday, the rupee strengthened against the dollar, breaking a three-session losing run and defying a wider global sell-off in risky assets. This improvement was fueled by strong capital inflows and dollar sales by exporters.
According to Bloomberg, the rupee recently traded at 79.8150 against the dollar, down from its previous session's finish of 79.8650.
The rupee was currently quoted at 79.81 vs the US dollar, up 2 paise from the closing price on Tuesday.
According to Reuters, the price of the Indian rupee increased from the previous session's exchange rate of 79.8625 to 79.77 per US dollar. The value of the local currency has decreased by 0.15 percent since last week's start.
While the offshore Chinese yuan has dropped by around 2% and the Korean won has dropped by 3 per cent, and the Indonesian rupiah has decreased by 1.2 per cent.
Asian currencies have suffered as a result of the Federal Reserve's aggressive stance and a decrease in interest rates at the Chinese central bank. The dollar index has gained by about 3% since last Monday.
Anindya Banerjee, Head of Research for FX and Interest Rates at Kotak Securities, told Reuters that the rupee's outperformance can be ascribed to foreign equities portfolio inflows and hopes that the Reserve Bank of India will protect the 80 level.
Over $5 billion in foreign capital has been invested in Indian stocks this month. In contrast, the first half of the year had outflows of $28 billion.
Domestic equity indexes closed Wednesday with slight gains, continuing their recent trend of winning he second straight day.
According to the most recent exchange statistics, Foreign Institutional Investors (FIIs) were net purchasers on Tuesday in the Indian capital market, buying shares worth 563.00 crore.
The Reserve Bank of India's tolerance for rupee volatility has also been beneficial, according to Garima Kapoor, senior vice president and chief economist at Elara Capital.
Down the interim, the RBI has been cutting reserves to rein in excessive rupee volatility. In November, India's foreign exchange reserves fell to their lowest level since 2020.
During the week ending August 12, as the RBI intervened to support the rupee, India's foreign exchange reserves fell by more than $2 billion.
According to the source, who cited a spot and forwards dealer at a private sector bank in Mumbai, exporters' repeated dollar bids to lock in a higher forward rate amid a reasonably stable rupee are preventing the dollar from rising over 80.
The trader said, "Importers are waiting and utilizing the record high (on the dollar) of 80.0650 as a stop loss.
