The rupee ended at 85.7050 against the U.S. dollar, slightly higher from its previous close at 85.7550. The local currency hovered between 85.89 and 85.6850 through the session.
Asian currencies were mixed while the dollar index was little changed at 104.2, with the focus turning to the upcoming announcement of reciprocal U.S. tariffs on April 2.
Near-constant shifts in U.S. tariff policies have left traders unsure of how the announcement is likely to play out.
However, the rupee has benefited from dollar inflows spurred by repatriation of corporate profits and a pick up in foreign portfolio investments over recent sessions.
Overseas investors have bought more than $2 billion worth of Indian shares in the last four days, while month-to-date inflows into bonds stood at little over $3 billion. Two other things also helped the rupee on the day – interbank traders’ interest in running overnight long positions ahead of the financial year end and high returns from carry, traders said. Following the recent string of gains, the rupee appears to be in a “consolidation period”, and is unlikely to stray much from the 86.50-87.20 range ahead of the U.S. tariff announcement, a trader at a state-run bank said.
Activity in the global FX options market signalled that market participants do not expect the announcement to reignite volatility.
However, uncertainty over the tariffs and the prospect of large-scale government spending cuts has contributed to a sharp fall in U.S. consumer sentiment, which has declined to levels last seen in 2013, per data released on Wednesday.
“Beyond an initial period of possible U.S. dollar recovery we continue to see scope for further dollar depreciation,” MUFG Bank said in a note.
