By Nimesh Vora
MUMBAI (Reuters) – The Indian rupee rose on Friday, logging its best weekly performance in seven weeks on the back of the dollar’s pullback and equity inflows.
The rupee rose 0.77% on the day to close at 81.9650 per dollar, aided by possible dollar inflows-related investment into shares of Adani Group companies.
For the week, the rupee was up 0.95%, its biggest weekly advance since mid-January. The rupee began the week on the defensive, falling to near 83 on Monday, on concerns over the U.S. inflation outlook.
The Reserve Bank of India likely sold dollars via public sector banks to prop up the rupee.
The RBI’s resolute defence of the 83 level alongside how markets were positioned in wake of the Adani inflow has helped turnaround the near-term outlook on the rupee, a spot trader at a private sector bank said.
“We reckon the rupee has shifted into the new range of 81.80-82.30,” Amit Pabari, managing director at CR Forex said.
The move below 82.30 on USD/INR pair had possibly triggered a round of stop losses, he added.
The dollar index was down about 0.5% this week and the U.S. currency declined against major Asian currencies. This was despite U.S. near and far maturity yields reaching multi-year highs and a further repricing of the Federal Reserve terminal rate expectations.
The Fed’s favoured inflation gauge rose more than expected, data released last Friday showed.
“We now expect the Fed funds rate to peak at a higher level..,” ING Bank said in a note. “We think the Fed will now hike in March, May and June (by 25 basis points each.”
ING, however, maintained its view that the U.S. central bank will cut rates late this year.
Futures have fully priced a 25 bps hike at the next three meetings and about 14 bps of rate cuts this year.
(Reporting by Nimesh Vora;Editing by Nivedita Bhattacharjee)
