Indian rupee gains this week as dollar supply surges ahead of deposit window's close

Business Recorder reported that the Indian rupee closed higher on Friday as a rush of dollar liquidity ahead of a special deposit window's closure lifted the currency. The rupee settled at 95.3775 against the dollar, up 0.2 per cent, compared with 95.54 on Thursday. It had slipped slightly early in the session but reversed course in the afternoon and gained 0.3 per cent over the week.

Flows linked to the deposit scheme set off stop-loss orders and the unwinding of bets on rupee weakness. Bankers said the Reserve Bank of India's decision to give lenders more room to use its swap facility should stop surplus dollars from lingering in the banking system for long. The discounted non-resident dollar deposit programme closes on Monday.

Early pressure from month-end importer dollar demand gave way to a sharp turnaround, as flows ahead of MSCI index rebalancing and offers from state-run banks pushed the currency pair higher, traders said. The MSCI rebalancing falls on August 31, and bankers said related inflows added further support. Attention now turns to Federal Reserve Chair Kevin Warsh's Jackson Hole speech, where market participants want clarity on inflation, the Fed's policy approach and bond-market turbulence. Amit Pabari of CR Forex said a hawkish message would strengthen the dollar and weigh on the rupee, while a dovish tone would ease pressure on the currency.