The Indian rupee climbed to a two-month high on Thursday, supported by likely inflows and the lingering impact of the Reserve Bank of India’s persistent dollar offers near the 88 level.
The rupee rose to 87.6350 per dollar, its highest since late August, before dipping back to near 87.70.
While state-run banks were seen selling dollars, traders reckoned the flows were not on behalf of the RBI. The central bank’s recent defence near 88, however, has continued to anchor sentiment and dampen volatility, they said.
“The flow mix today, it would seem, is more friendly for the rupee,” said a dealer at a state-run bank, adding that he had no information on any large specific flow.
Importers remain keen to hedge at current levels, while exporters appear more inclined to wait, he added.
Traders cited a tentative turnaround in equity inflows and optimism around a potential US-India trade deal as factors supporting the rupee. Foreign investors are net buyers of Indian shares in October so far.
US INFLATION DATA EYED
Asian currencies were mixed on Friday, with traders awaiting the release of September US inflation data later in the day. The report was originally scheduled for October 15 and has been delayed due to US federal shutdown.
Markets have fully priced in a 25-basis-point rate cut by the Federal Reserve next week, with the data expected to shape expectations for another move in December.
Analysts warn that tariff pressures could keep US inflation sticky, leaving the Fed in a difficult spot on what to do after next week’s rate cut.