Aniket PujariMUMBAI, March 21 (Reuters) – The Indian rupee is likely to show limited reaction on Friday to the dollar index’s recovery, with inflows from foreign banks expected to sustain its weekly upward trend.
The 1-month non-deliverable forward indicated that the rupee will open flat-to-marginally higher to the U.S. dollar from 86.3675 in the previous session.
This week, the rupee has appreciated by 0.7%, bringing its March advance to more than 1%, making it the leading major Asian currency this month. Dollar sales by foreign banks, driven by client flows, have propelled the rupee to the top of the pack.
The recent performance represents a shift for the Indian currency, which had been under considerable strain due to equity outflows and hedging activities by importers. The rupee touched an all-time low of 87.95 against the U.S. dollar in February.
The rupee’s “good run-up most likely will not have much legs”, a currency trader at a Mumbai-based bank said.
“For me, 86 marks the absolute floor (for dollar/rupee pair) and I will be very surprised if we have a sustained dip below that.”
The dollar index rose on Thursday and inched up in Asia trade towards the 104 level. The dollar has largely struggled recently amid worries over a U.S. economic slowdown and a rally in the euro.
The Federal Reserve’s updated economic projections, released this week, include reduced U.S. growth forecasts for 2025 and 2026. The Fed reaffirmed its intention to implement two rate cuts in 2025, mirroring its December guidance.
KEY INDICATORS: ** One-month non-deliverable rupee forward at 86.56; onshore one-month forward premium at 24.5 paisa ** Dollar index up at 103.86
** Brent crude futures up 0.3% at $72.2 per barrel
** Ten-year U.S. note yield at 4.24% ** As per NSDL data, foreign investors sold a net $119.2 million worth of Indian shares on March 20
** NSDL data shows foreign investors bought a net $352.8 million worth of Indian bonds on March 20
(Reporting by Nimesh Vora; Editing by Mrigank Dhaniwala)
