The Indian rupee rose on Friday, recovering from a fall to its all-time low in the previous session, which was spurred by weakness in the Chinese yuan and likely dollar outflows.
The rupee was trading at 83.61 against the US dollar at 10:00 am IST, up from its previous close of 83.6525. The currency fell to a record low of 83.6650 on Thursday.
The offshore Chinese yuan fell to 7.29 on Friday, its lowest level in seven months, after lower central bank guidance for the currency on Thursday spurred market speculation that authorities may be willing to see it weaken. .
The rupee’s fall to a record low was due to pressure from “multiple factors, such as a weaker yuan, capital outflows and broad dollar strength against G10 currencies,” said Shinhan Vice President Apurva Swarup. Bank.
Traders pointed to the outflow of funds on account of the sale by the British group Vodafone of an 18% stake in the Indian company Indus Towers, larger than expected, among the factors that hurt the local currency.
On Friday, mild dollar selling by foreign banks helped the currency rise, a currency trader at a state-run bank said.
The rebalancing of a FTSE equity index is expected to attract $250 million in inflows, Nuvama Alternative & Quantitative Research estimates.
“Likely dollar sales by the RBI (Reserve Bank of India), inflows on account of inclusion in the JP Morgan EM Bond index and rebalancing of the FTSE index could limit losses (for the rupee)” HDFC Bank said in a note.
“We expect the pair to return to the 83.0-83.50 range over the next month.”
The dollar index was approaching 105.6 after rising 0.4% on Thursday driven by the Swiss National Bank’s second consecutive rate cut and the Bank of England’s signals of a rate cut in August. (Reporting by Jaspreet Kalra; Editing by Sohini Goswami)
