Rupee holds up well to dollar’s rally, almost unchanged week-on-week

the rupee It was little changed on a weekly basis, paring losses incurred by Asian peers due to a rally in the dollar index, buoyed by dollar sales by foreign banks.

The rupee fell slightly at 82.04 to the dollar on Friday and rose about 0.1% for the week. The local currency has been in the range of 81.60 to 82.30 this week.

The rupee reached its lowest level this week at 82.30 on Wednesday on the back of US Federal Reserve Chairman Jerome Powell’s comments which opened the door to a 50 basis point interest rate hike at this month’s meeting. US revenues and the dollar index jumped after Powell’s remarks.

The rupee has managed to recover, buoyed by continued sales of dollars by a major foreign bank, likely on behalf of its honest and offshore clients, according to traders.

Amit Babari, managing director at CR Forex, said the rupee mostly ignored Powell’s reference to higher and possibly faster interest rates.

FPI streams

Babari said it was likely that foreign portfolios and investment inflows helped the rupee “to have the upper hand among Asian currencies”. He noted that Indian stocks received inflows of 14,000 crore ($1.71 billion) this month compared to outflows in January and February.

In contrast to the performance of the rupee this week, the Korean won fell 2 percent and the offshore Chinese yuan lost 1 percent. The dollar index has risen 0.7 percent this week so far.

The outlook for Asian currencies next week hinges on the US jobs report due later today and US inflation data due next Tuesday.

Powell indicated this week that the US central bank’s decision to raise interest rates by 25bp or 50bp at the March 21-22 meeting will depend on incoming data.