MUMBAI: The Indian rupee closed nearly flat on Wednesday after facing pressure early in the session, which was countered by dollar sales by state-run banks and as traders awaited the US Federal Reserve’s monetary policy decision.
The rupee closed at 86.54 against the US dollar, barely changed from its close at 86.5225 in the previous session.
While dollar demand related to month-end importer payments and the maturity of positions in the non-deliverable forwards market hurt the rupee in the first-half of the session, the currency was supported by dollar sales by state-run banks, traders said.
The dollar index rose 0.1% to 108.1 on Wednesday, while most Asian markets were shut for local holidays.
So far in January, the rupee has declined more than 1% and is the worst performer among major Asian currencies due to persistent outflows and uncertainty about the US President’s approach to trade tariffs.
Foreign investors have sold nearly $9 billion of local stocks and bonds, on a net basis, this month.
The BSE Sensex and Nifty 50, India’s benchmark equity indexes, are on a four-month losing streak, set for their worst such run in 23 years as weak earnings, foreign outflows and economic uncertainty have taken the wind out of the sails of a market that hit record highs just four months back.
The rupee is likely to consolidate in the 86.30-86.70 band if inflows don’t resume on a net basis, a trader at a foreign bank said, assuming the central bank continues to curb volatility.
While the Fed is widely expected to keep rates unchanged later in the day, investors will keep a close eye on commentary from Chair Jerome Powell.
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