After posting early losses, the Indian rupee closed stronger against the dollar on Friday amid continuing hostilities on the border between India and Pakistan. The domestic currency closed 33 paise higher at 85.38 against the dollar even as the stock markets declined by over one per cent.
The rupee had ended at 84.72 against the greenback on Thursday but the currency snapped three straight days of losses on Friday on FPI inflows and expectations that the RBI will intervene in the currency market to stabilise the rupee. However, it posted two consecutive months of depreciation.
Rahul Kalantri, VP Commodities, Mehta Equities Ltd, said, “even as the rupee recovered a bit after two days of fall, the currency could witness volatility amid escalating tensions with Pakistan.” While a strong rebound in the US dollar index supported by US-UK trade agreement and jump in crude oil prices are likely to maintain pressure on the rupee, continuing FPI flows into the domestic equity markets and better than expected corporate earnings are supporting the local currency. “We expect the rupee to trade in the range of 84.74-86.05 next week,” Kalantri said.
The dollar declined on profit-taking after jumping to a one-month high against a basket of currencies and the euro after Thursday’s US-UK trade deal. The agreement sparked optimism that this could mark the end of recent anxiety over tariff uncertainty.
Dilip Parmar, Senior Research Analyst, HDFC Securities, said the currency found renewed strength over the fag end of the week. This rebound was fuelled by consistent inflows from foreign institutional investors into Indian stock markets. Furthermore, it seems traders adjusted their holdings to navigate potential uncertainties over the weekend, he said.
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