MUMBAI: The Indian rupee ended a touch higher on Monday as modest dollar inflows helped the currency hold its ground in the face of persistent importer hedging demand and data showing India’s trade deficit hit a record high in October.
The rupee closed at 88.63 against the U.S. dollar, marginally higher from its close at 88.7425 in the previous session.
The rupee earlier rose to a session high of 88.5775 on likely inflows into local stocks, but pared gains after importers’ dollar bids picked up and data showed a worse-than-expected merchandise trade deficit.
The trade deficit widened to a record $41.68 billion in October, fuelled by surging gold imports.
The data also showed that India’s exports to the U.S. declined to $6.31 billion last month, down about 9% year-on-year as the country grapples with steep U.S. tariffs levied earlier in the year.
Investors are also keeping a close eye on the ongoing U.S.-India trade negotiations, and reckon that a breakthrough could spark foreign portfolio flows into local stocks and help the rupee rebound from near record-low levels.
Risk-off poised to drag Indian rupee near record low, challenging RBI’s defence
New Delhi and Washington could soon agree to “address reciprocal tariffs,” as part of the first part of an agreement, an Indian trade official said on Monday.
Lately, the currency has leaned on frequent interventions by the central bank to stave off a fall below its all-time low of 88.80.
The central bank was intermittently active to support the rupee even on Monday, a senior trader at a Mumbai-based bank said.
Meanwhile, Asian currencies were down between 0.1% and 0.5%, while the dollar index treaded water just shy of the 99.5 mark as investors awaited a barrage of U.S. economic data set to be released this week.
“Our forecasts for the US dollar to weaken further heading into year-end rest on the assumption that US labour demand remains weak leaving the door open for further Fed rate cuts,” MUFG said in a note.
American Dollar Exchange Rate