Rupee likely to open steady; corporate dollar demand hurdles rally extension
The Indian rupee is likely to open little changed on Thursday, tracking Asian peers, with traders expecting importer dollar demand to limit gains sparked by New Delhi and Washington clinching a long-awaited trade deal.
The one-month non-deliverable forward indicated the rupee will open in the 90.45-90.48 per dollar range versus the U.S. dollar, after settling at 90.4350 on Wednesday.
The rupee has recovered from record lows near 92 after the U.S. trade deal was announced late on Monday but has been unable to rise above the 90 handle.
Traders said dollar demand from local corporates, including a large conglomerate over the past two sessions, has capped the rupee's near-term gains.
"The focus now is on whether foreign equity inflows bounce back. In case they don't, the rupee is likely to resume drifting lower once the sentimental boost from the trade deal fades," a trader at a state-run bank said.
"There has also been a pickup in exporter hedging interest over last two sessions so that could offer near-term relief."
Analysts reckon that the Reserve Bank of India's forex intervention policy could also complicate things.
"We recall how the INR underperformed in 2Q25 (April-June 2025) partly because the RBI shrank its short FX forward book by $25 billion then. But our base case is that the RBI allows the INR to recover first in 1Q26 (January-March 2026), before rebuilding FX reserves," analysts at HSBC said in a note.
The RBI's short dollar forward book stood at $62.3 billion as of December-end, while foreign exchange reserves hit a record high of $709.4 billion in the week ended January 23.
On Thursday, Asian currencies were flat-to-modestly weaker while the dollar index was steady at 97.7.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 90.60; onshore one-month forward premium at 12.75 paisa
** Dollar index at 97.7
** Brent crude futures down 1.7% at $68.3 per barrel
** Ten-year U.S. Treasury yield at 4.27%
** As per NSDL data, foreign investors bought a net $836 mln worth of Indian shares on February 3
** NSDL data shows foreign investors sold a net $53.3mln worth of Indian bonds on February 3
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