The Indian rupee saw a slight increase on Friday due to inflows into local stocks, but importers’ demand for the dollar prevented significant gains. The rupee was trading at 83.84 against the US dollar as of 8.55am UAE time, slightly up from its previous close of 83.87. Despite expectations of inflows related to India’s higher weight in MSCI’s emerging market equity index, the rupee was unable to strengthen significantly due to strong dollar demand from local importers.
In anticipation of up to $3 billion in inflows related to India’s increased weightage in the MSCI index, benchmark Indian equity indexes BSE Sensex and Nifty 50 touched record highs in early trading. The rupee is expected to trade within a range of 83.75 to 83.90 with a slight bias towards appreciation, according to Amit Pabari, managing director at FX advisory firm CR Forex. The dollar index remained stable at 101.3, while most Asian currencies declined except for the offshore Chinese yuan, which saw a 0.2 per cent increase to 7.08, its highest level since June 2023.
Dollar-rupee forward premiums decreased due to a rise in US bond yields following data released on Thursday that eased concerns about an economic slowdown. The 1-year implied yield was down to 2.14 per cent. Key drivers of US rate cut expectations ahead of the Federal Reserve’s September meeting include US PCE inflation data due later on Friday and labor market data scheduled for release next week. India’s GDP data for the April-June quarter will also be released after market hours and is expected to show a slowdown in economic growth, according to a Reuters poll.
Overall, the Indian rupee experienced slight gains on Friday driven by inflows into local stocks, but was constrained by importers’ dollar demand. The higher weightage for Indian equities in the MSCI index is expected to bring in significant inflows, pushing benchmark equity indexes to record highs. The rupee’s trading range for the day is expected to be between 83.75 and 83.90 with a slight bias towards appreciation. The stability of the dollar index and the upward movement of the offshore Chinese yuan contributed to the rupee’s performance. As the market awaits key data releases and events, including US rate cut expectations and India’s GDP data, the rupee’s movement will continue to be influenced by global and domestic factors.
