The rupee closed lower at 86.7125 against the U.S. dollar after rising to 86.4850 earlier in the session. The currency was up 0.1% week-on-week.
While the currency benefited from a broadly weaker dollar in early trades, persistent dollar buying from foreign banks ate into the gains, a trader at a private bank said.
“The last two days’ price action suggests that unless equity inflows start, dips (on USD/INR) will be short-lived,” the trader added.
Foreign investors have net sold over $11 billion of local stocks over 2025 so far. Benchmark Indian equity indexes, the BSE Sensex and Nifty 50 declined about 0.5% each on the day.
The dollar index was higher at 106.6 after touching a two-month low on Thursday, while Asian currencies were mostly higher by 0.1% to 0.3%. “We are not in the camp of thinking U.S. data will soften enough to back a dollar downtrend, but the bar for a negative USD reaction to data is not high, and we admit the path to dollar re-appreciation can be bumpy,” ING Bank said in a note. Meanwhile, dollar-rupee forward premiums were choppy as they rose in early trading on lower U.S. bond yields but reversed course later in the session.
Two traders pointed to dollar-rupee buy/sell swaps by state-run banks but were unsure if it was on behalf of the Reserve Bank of India.
Over the last few weeks, the RBI has conducted such swaps to mitigate the impact of its spot dollar sales on banking system liquidity.
