Rupee gains for second week on inflows, focus shifts to Fed

the Indian rupees It rose for the second week in a row, supported by foreign inflows into stocks, but the gains were limited by expectations that the central bank would not allow the currency to appreciate significantly.

The rupee closed at 81.9450 per dollar against 81.9850 on Thursday.

The local currency has risen 0.1 percent this week, but has been hovering largely around 82 against the dollar amid lack of volatility. The rupee rose 0.6 percent last week.

“We are at a rare point for the rupee where the normal effects are not working – be it global or local,” said Jairam Krishnamurthy, founding partner at Almus Risk Consulting.

Krishnamurthy said this was due to the actions of the central bank to reduce the volatility of the rupee and showing a clear intention not to allow it to rise, despite many factors that worked in favor of its rise. Data from the National Securities Depository Limited showed that foreign investors bought about $640 million in Indian stocks in the first three trading sessions this week.

Despite the inflows, traders said the rupee did not rise above 81.95 during the week with possible intervention by the Reserve Bank of India.

The focus has now shifted to the US Federal Reserve’s policy decision scheduled for next Wednesday, where a 25 basis point rate hike is fully taken into account.

Investors will be watching comments from Federal Reserve Chairman Jerome Powell next week on expectations for future interest rate hikes.

A slew of important data coming out of the US – Flash PMI, June Quarter GDP, Initial Jobless Claims and Core PCE will also be on investors’ radar next week.

The dollar index is up more than 1 percent so far this week, while the 10-year US Treasury yield rose nearly three basis points.