MUMBAI: The Indian rupee fell on Friday, singed by likely dollar outflows and traders lowering long bets, but posted its best rise in over three years after New Delhi and Washington announced a long-awaited trade deal.
The Indian rupee closed at 90.6550 per dollar, down 0.3% on the day but up 1.4% on the week, its best weekly rise since January 2023.
India’s central bank kept its key repo rate unchanged, buoyed by a positive economic outlook and reduced pressures following trade deals with the U.S. and Europe. The monetary policy stance was retained at “neutral”, suggesting rates will stay low for some time to come.
“Going forward, we think the MPC will be guided by the evolving macroeconomic conditions and the outlook based on data from the new series in charting the future course of monetary policy,” economists at Barclays said in a note.
The rate decision had little bearing on the rupee, which was hit by outflows, traders said.
Strong appetite to buy dollars at the daily reference rate led to weakness earlier in the session. The fall worsened as stop-losses were triggered on long-Indian rupee wagers, a trader at a Mumbai-based bank said.
This eroded gains for the week, which were largely powered by a rally on Tuesday after the U.S. and India announced they had reached a trade deal following months of negotiation.
While traders and analysts say that the trade breakthrough has lifted the pall over the rupee, a sustainable rally would depend on a bounceback in foreign portfolio inflows.
Foreign portfolio investors have net bought about $1 billion of local stocks over February so far after selling a net of $4 billion last month.
In global markets, the dollar index was a tad lower at 97.8 while Asian currencies were trading mixed.
American Dollar Exchange Rate