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Rupee continues rally amid weak US data; opens higher at 85.50/$
The Indian rupee extended gains for the second consecutive day, supported by weak US economic data and easing geopolitical tensions.
The domestic currency opened 21 paise higher at 85.50, a day after closing at 86.71 against the dollar, according to Bloomberg. The unit is headed for its best weak several weeks, aided by a plunge in oil prices after the Israel-Iran ceasefire.
The currency has depreciated by 0.2 per cent so far this month, making it one of the worst-performing Asian currencies.
The Indian rupee is expected to appreciate to 85.50, and trade within a range of 85.35 to 85.95, according to Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP. Inflows dominated outflows yesterday, lifting the rupee by 38 paise, and a similar trend is anticipated today, he said. "However, potential outflows from oil payments, Reserve Bank of India (RBI) dollar purchases, and global funds buying may cap gains."
A significant outflow of around $1 billion could also occur due to JSW Paints' acquisition of Akzo Nobel, Bhansali said, adding that the final day of the HDB Financial issue could trigger additional inflows. Suggested strategy would be to buy on dips for hedging, sell on upticks for cash and near-term transactions, he said.
Meanwhile, the dollar index was slightly higher driven by hopes for a rate cut by the US Federal Reserve. The first quarter consumer spending grew at the weakest pace since the pandemic. The US dollar index, which measures the greenback against a basket of six major currencies, was up 0.11 per cent at 97.25.
On Thursday, White House Press Secretary Karoline Leavitt said that US President Donald Trump could extend the July 9 deadline to impose reciprocal tariffs in a bid to secure deals with other trading nations. This sent the equity market higher on Wall Street.
With global risk sentiment improving and the potential for continued fund inflows, the rupee may head towards 85.25 in the coming days, Jateen Trivedi, VP research analyst - commodity and currency at LKP Securities, noted.
The RBI's bulletin showed a decline in its short dollar position to $73 billion, with outstanding positions of up to three months falling to $15 billion. This provides the central bank with greater flexibility to intervene in the event of pressure on the rupee, experts noted.
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