Indian rupee surprise Friday recovery faces test from weak peers, fragile risk

Business Recorder reported that the Indian rupee’s Friday rebound followed heavy dollar sales by a foreign bank, but traders cautioned that the move could be difficult to extend. After touching 95.28 per dollar, the currency was expected to begin Monday near 94.94-94.98, with traders describing it as likely to stay close to 95 for now. They could not determine what prompted the bank’s selling.

Broader currency conditions remain challenging: Asian peers weakened as a fall in US technology shares unsettled investors, while lower oil prices could ease pressure on India. The technology selloff creates competing forces for the rupee, since it weakens risk appetite but India is viewed as a possible refuge from the sector downturn; overseas investors bought Indian equities on Friday. Separately, the Reserve Bank of India’s net short position in dollar forwards reached $240 billion in September, up from $200 billion in August, which analysts associated with deposits mobilised under its FCNR(B) scheme and swaps with banks.