Rupee posts biggest weekly gain in over a year, underperforms peers

The Indian rupee rose on Friday and posted its biggest weekly rise more than a year, helped by relief in the Asian forex space over US President Donald Trump not levying tariffs immediately on taking office. 

The rupee closed up 0.3 per cent at 86.2050 per US dollar, and was up 0.5 per cent this week, highest since week ended Aug.

25, 2023. 

It, however, underperformed its regional peers. The Korean won rose nearly 2 per cent and the offshore Chinese yuan climbed 1.3 per cent.

The dollar index was down 1.7 per cent so far this week, after Trump, who had threatened tariffs on Canada, Mexico, the European Union and China, did not immediately put them into effect. 

In a separate interview, Trump also suggested that he could reach a trade deal with the world's second-biggest economy. 

Without the "damaging headlines from Trump on tariffs", the dollar has struggled, Srinivas Puni, managing director at QuantArt Market Solutions, said. 

"USD/INR is in the process of finding a range around the 86.50 mark for now. However, it remains vulnerable over the longer horizon given the domestic issues related to current account and flows." he said. 

Portfolio flows into India have been weak amid uncertainty around Trump's policies, sluggish growth and higher US yields.

So far this month, foreigners have taken out more than $7 billion from Indian equities. 

The dollar/rupee forward premiums, meanwhile, extended declines this week, as the Reserve Bank of India conducted buy/sell swaps alongside its spot intervention. 

The 1-year implied yield on dollar/rupee forwards is down almost 50 basis points from its recent highs, at 2.29 per cent.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)