Rupee likely to inch higher on Asian cues, RBI support hopes
The Indian rupee is likely to open higher on Friday, supported by a modest rise in Asian peers and expectations that the central bank would resist further weakness in the currency.
The 1-month non-deliverable forward (NDF) indicated that the rupee will open at 88.55-88.66, after declining 0.6% on Thursday to settle at 88.6950. The currency's intraday low of 88.7375 was only a whisker away from its record 88.80 mark hit about two weeks ago.
The rupee has been under constant pressure in recent sessions on hedging interest from importers, stop losses on short dollar positions, and NDF-related expiries. The pressure intensified on Thursday after the U.S. Federal Reserve's hawkish turn a day earlier, with Chair Jerome Powell's comments prompting investors to dial back expectations of a December rate cut.
"The bid (on dollar/rupee) is just not drying up, there's underlying demand across segments," a currency trader at a private sector bank said.
"It's a real surprise we're already testing those all-time lows again...the RBI would be reluctant to let 88.80 break - once that level is breached, sentiment could worsen."
The Reserve Bank of India had previously defended the 88.80 level for several sessions through interventions, before stepping in more aggressively to spark what is now proving to be a short-lived rally in the rupee.
ASIAN CUES
Asian currencies were mostly higher on Friday, with the offshore Chinese yuan at 7.11 to the U.S. dollar. The much-anticipated summit between U.S. President Donald Trump and Chinese President Xi Jinping led to reduced U.S. tariffs on Chinese goods, U.S. soybean purchases being resumed by Beijing, and continued rare earth exports from China.
"These developments suggest a mutual willingness to stabilize trade relations for now," MUFG Bank said in a note.
