Rupee hits at 11-week high against US dollar on strong FPI inflows

The Indian rupee (INR) closed 15 paise higher at Rs 81.94 per US dollar (USD), an 11-week high, on Monday, due to robust foreign inflows, say dealers.

“The USD/INR spot closed 13 paise lower at Rs 81.81, the lowest level since May 8, due to foreign portfolio investor (FPI) dollar sales and corporate dollar inflows,” says Anindya Banerjee, vice-president, currency derivatives and interest rate derivatives at Kotak Securities.

The impact of a rise in the dollar index was offset by the overall positive sentiment due to steady inflows, observe dealers. The Indian unit settled at Rs 82.01 per dollar on Friday.

“The flows from Bain Capital and FPI inflows ensured that the rupee rose to Rs 81.85, notwithstanding a rise in the dollar index,” says Anil Bhansali, head of treasury at Finrex Treasury Advisors.

On Sunday, Bain Capital decided to buy a 90 per cent stake in Adani Capital and Adani Housing for Rs 1,440 crore.

Dealers expect the rupee to remain in the range of Rs 81.7 to Rs 82.1 per dollar as the Reserve Bank of India (RBI) continues to intervene to rein in volatility. The central bank has been stocking up on the greenback as the rupee approaches Rs 81.95 per dollar. However, dealers say that the RBI might now intervene at around Rs 81.85 per dollar.

“Over the near term, we expect the USD/INR to trade within a broad range of Rs 81.4 and Rs 82.1 on the spot,” says Banerjee.

Traders now eye the US Federal Reserve’s decision on Wednesday.

Market participants largely expect the US rate-setting panel to hike the funds rate by 25 basis points. However, the market awaits commentary from the members of the committee for further guidance.

On the domestic front, the RBI is expected to keep the repo rate unchanged at 6.5 per cent, at least for the current calendar year.

The rupee has appreciated 0.26 per cent against the dollar in July and 0.43 per cent in the current fiscal year.