Rupee's surprise Friday recovery may prove harder to sustain
The Indian rupee clawed back from 95.28 to the dollar on Friday on heavy dollar selling by a large foreign bank, but traders expect it to open barely changed at 94.94-94.98 on Monday and warn the rebound will be difficult to build on.
A currency trader at a private sector bank called the recovery a "surprise" and "very much, against the trend", adding that Friday's move strengthens the view the rupee stays range-bound around 95 for now. Neither he nor other traders could identify the flows behind the foreign bank's selling.
The backdrop is unhelpful. Asian currencies were mostly weaker to start the week after a selloff in US equities, with technology shares falling on Friday and bonds heading for their biggest monthly rise in nearly three years as investors questioned whether heavy AI spending will earn sufficient returns. That hurts risk appetite generally, though India is seen as a hedge against the technology-driven rout, and overseas investors were net buyers of Indian equities on Friday. A dip in oil prices may offer some relief.
In the forwards market, the Reserve Bank of India's net short dollar position rose to an all-time high of $240 billion in September from $200 billion a month earlier. Analysts said the jump likely reflects dollar inflows mobilised by banks under the RBI's special FCNR(B) deposit scheme and subsequently swapped with the central bank.
