By Anushka Trivedi
MUMBAI (Reuters) – The Indian rupee gained on Friday but finished the week down near 82 per U.S. dollar on foreign equity flows likely fuelled by a selloff in Adani Group shares.
On Friday, the partially convertible rupee ended up 0.42% at 81.8275 per dollar, having declined up to 82.31, as Indian equities surged late in the session.
However, the currency was down 0.37% for the week, having traded on the weaker side of 82 for the most part.
The unit was also among the worst-performing Asian emerging market currencies over the period, with only the Thai baht weakening further, at around 0.5%.
“Increasing foreign fund outflows and the withdrawal of Adani Enterprises’ $2.5 billion follow-on public offer (on Wednesday) dampened market sentiment, weakening the rupee against the dollar,” said Ritesh Bhansali, vice president at Mecklai Financial Services.
Foreign investors sold about $374 million worth of Indian equities on Thursday, according to preliminary data. That is on top of the $3.5 billion worth of withdrawals in January.
Indian shares rallied 1.2% on Friday to claw back weekly declines, with Adani Enterprises ending higher after falling over 30% during the session.
Meanwhile, the Reserve Bank of India’s (RBI) likely absence in the forward market in the wake of the rupee’s decline has halted the uptrend in forward premiums, analysts said.
The 1-year USD/INR forward implied yield declined up to 2.22% on Friday, adding to the 10-basis-point (bps) fall in the previous session.
Meanwhile, the dollar index started to give back some of its overnight gains ahead of the latest U.S. employment data, which may shift Federal Reserve policy on the number of rate hikes planned this year. The Fed already hiked rates by a smaller 25 bps this Wednesday.
Investors now look to the RBI monetary policy committee meeting decision on Feb. 8, with a 25 bps increase widely expected.
(Reporting by Anushka Trivedi; Editing by Janane Venkatraman)
