India rupee hits near four-week high on equity-related flows, RBI support; logs monthly rise

Business Recorder reported that the Indian rupee reached an almost four-week peak against the US dollar on August 31, finishing the month with a gain, helped by index-related inflows and intervention from the Reserve Bank of India. The currency closed 0.2 per cent stronger at 95.1625, its best level since August 5, compared with 95.3775 in the previous session. For August as a whole it rose 0.2 per cent, reversing a 0.8 per cent fall in July.

The rupee had initially weakened by 0.1 per cent at the open, as oil prices jumped after a fresh escalation between the United States and Iran and expectations grew for a September rate increase by the Federal Reserve. Those expectations followed hawkish remarks from Fed Chair Kevin Warsh. The currency reversed course around midday after the RBI stepped in, and its sustained presence was seen as insulating it from adverse external developments.

Traders said dollar offers from foreign banks linked to MSCI index-related inflows also supported the rupee. Analysts estimate roughly $1 billion in net inflows tied to the MSCI rebalancing taking effect on September 1. Dhaval Shah, founder and managing director of De-Risk Forex Consultancy, said that any September hike would be a protective move, given weaker jobs and manufacturing data.