By Nimesh Vora
MUMBAI (Reuters) -The Indian rupee is likely to sidestep the regional downtrend on Friday, with support coming from the encouraging intraday reversal seen in the previous session.
The 1-month non-deliverable forward indicated that the rupee will open slightly higher-to-flat against the U.S. dollar from the close of 85.26 in the previous session.
The rupee witnessed a notable intraday swing on Thursday, dropping to 85.66 before clawing back losses to settle around 85.25. The decline past 85.66 was linked to importer-driven dollar demand for immediate payments and positioning adjustments.
With momentum favourable for the rupee, flows supportive, and a broader risk-on mood, the Indian currency “should do well”, a currency trader at a bank said.
Foreign investors have returned to Indian equities, lending support to the rupee. A de-escalatory tone from President Donald Trump—on both U.S. tariffs and the Federal Reserve’s independence—has buoyed risk sentiment, aiding foreign inflows.
ASIAN CURRENCIES STRUGGLE
Most Asian currencies declined on Friday, and the dollar index edged higher to 99.60. The region’s currencies continue to deal with a volatile dollar, fuelled by ongoing tariff and Fed-related headlines.
The dollar index fell 1% on Monday after Trump threatened to fire Fed Chair Powell, and surged next day when he clarified he wouldn’t replace Powell and hinted at trade war de-escalation with China.
On the China front, investors are grappling with conflicting signals. Beijing stated on Thursday that no trade talks had taken place with Washington, while Trump later affirmed that direct negotiations are ongoing.
The dollar’s direction will be heavily influenced by news on U.S. tariffs, which, in turn, depends on the outlook for U.S. assets, analysts said. Recent optimism on trade has provided support for U.S. assets.
Investors are looking for confirmation of a more optimistic view on U.S. assets to justify buying the dollar, ING Bank noted.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 85.40; onshore one-month forward premium at 18 paise
** Dollar index up at 99.6
** Brent crude futures up 0.3% at $66.7 per barrel ** Ten-year U.S. note yield at 4.31% ** As per NSDL data, foreign investors bought a net $464.4mln worth of Indian shares on Apr. 23
** NSDL data shows foreign investors sold a net $29mln worth of Indian bonds on Apr. 23
(Reporting by Nimesh Vora; Editing by Janane Venkatraman)
