The Indian rupee ended the week firmer against the dollar, buoyed by dollar inflows linked to a nearing deposit window closure, while market focus shifts to the Federal Reserve’s upcoming remarks for clues on future policy directions.
The rupee ended the week firmer on Friday as a burst of dollar inflows, linked to a special deposit window nearing closure, helped the currency recover from early losses and finish at 95.3775 against the dollar. That was up 0.2 per cent from Thursday’s close of 95.54 and left the rupee 0.3 per cent stronger over the week.
Traders said month-end demand from importers initially weighed on the currency, but the mood shifted in afternoon trade as deposit-related dollar supply triggered stop-loss orders and forced some investors to unwind bearish rupee positions. Offers from state-run banks also helped turn the pair lower, while flows tied to MSCI index rebalancing due on August 31 provided additional support.
According to bankers, the Reserve Bank of India’s discounted non-resident dollar deposit scheme ends on Monday, and the central bank’s move to give lenders more flexibility in using its swap facility should help prevent excess dollar liquidity from lingering in the banking system. Market participants are now watching Federal Reserve Chair Kevin Warsh’s remarks at Jackson Hole later on Friday for clues on inflation and policy, with traders saying a hawkish tone could strengthen the dollar and pressure the rupee, while a more cautious message could ease that strain.
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