Rupee Steady as RBI Support Counters $1 Billion Equity Outflows
- Rupee seen steady as RBI expected to defend 87.80–88 levels.
- Overseas investors pulled out over $1 billion from equities in two sessions.
- Traders await U.S. PCE inflation data for Fed’s rate cut signals.
The Indian rupee is expected to open mostly unchanged, as support from the Reserve Bank of India (RBI) is seen balancing the drag from persistent foreign outflows and weak market sentiment.
The 1-month non-deliverable forward (NDF) market indicated the rupee would start in the 87.60–87.64 range against the U.S. dollar, nearly flat compared to Thursday’s close of 87.6250.
This week, the rupee has struggled to hold gains, with recovery attempts fizzling out amid concerns about the economic fallout of new U.S. tariffs. However, the RBI’s likely intervention has prevented the currency from sliding to fresh record lows. So far this week, the rupee has slipped just 0.1%.
Market participants said the RBI is expected to defend the 87.80–88 range strongly. A Mumbai-based currency trader noted, “The bias for dollar/rupee is higher, no question. But with the RBI sitting heavy at 87.80–88, there’s no clear trade. Everyone knows where the line in the sand is, so there’s hesitation.”
Foreign outflows have been weighing on the rupee. Over the past two sessions, overseas investors have sold more than $1 billion worth of Indian equities. Domestic markets have dropped nearly 2% during this period.
Across Asia, most currencies were weaker on Friday, except the Chinese yuan. Meanwhile, the U.S. dollar index edged higher.
Traders are now focusing on the U.S. Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, due later in the day. The data will provide clues on the U.S. interest rate outlook.
At present, markets are pricing in an 86% chance of a U.S. rate cut in September. Fed Governor Christopher Waller on Thursday said he expects rate cuts to begin next month, with more to follow, to move policy rates closer to neutral levels.
Key Indicators
- One-month NDF for rupee at 87.74; onshore one-month forward premium at 11 paise
- Dollar index at 97.98
- India’s June quarter GDP data due at 4:00 pm IST
- Brent crude futures down 0.8% at $68.1 per barrel
- U.S. 10-year Treasury yield at 4.21%
- Foreign investors sold $644 million of Indian shares on Aug. 26 (NSDL data)
- Net bond outflows of $24.5 million on Aug. 26 (NSDL data)
