Rupee outperforms most Asian peers as foreign inflows boost sentiment | Economy & Policy News

The Indian rupee was among the best-performing Asian currencies on Wednesday, gaining 0.26 per cent against the US dollar, as foreign portfolio inflows into domestic equities and positive sentiment in the non-deliverable forward (NDF) market helped the currency withstand a broadly stronger dollar, said dealers.

The rupee settled at 93.69 per dollar, its strongest level since April, against the previous close of 93.94 per dollar.

Among major Asian currencies, the rupee was the second-best performer of the day after the South Korean won, which gained 0.72 per cent. The Chinese yuan and Taiwanese dollar appreciated 0.10 per cent and 0.02 per cent, respectively. In comparison, the Indonesian rupiah fell 0.48 per cent, while the Philippine peso declined 0.49 per cent.

The currency has recovered from its record low of 96.96 per dollar touched in May, supported by measures announced by the Reserve Bank of India (RBI) and improving foreign portfolio flows. It had come close to breaching that level again last month.

The gains came despite a broadly stronger dollar, which was supported by higher-than-expected US inflation data and hawkish comments from Federal Reserve officials. Expectations of tighter monetary policy in the US have increased, with traders pricing in a 25-basis-point rate hike in December and a small possibility of a larger 50-basis-point increase.

“A stronger dollar and the prospect of higher US interest rates would typically weigh on emerging market currencies, including the rupee. But the pickup in foreign portfolio investment flows into Indian equities had provided support to the domestic currency,” said a dealer at a state-owned bank.

Traders said dollar-selling interest was visible across the market during Wednesday’s session, while activity in the NDF market also indicated an improvement in sentiment towards the rupee.

Foreign investors have bought nearly $6 billion worth of Indian equities in November so far, marking their highest monthly purchases since September 2024. The inflows have helped improve demand for the rupee and supported its recent recovery.

Government bond yields, however, hardened on Wednesday, tracking a sharp rise in US Treasury yields after hotter-than-expected inflation data and short bets ahead of the weekly government bond auction on Friday, said dealers.

The yield on the benchmark 10-year government bond rose 6 basis points to 7.21 per cent, while the five-year yield increased 4 basis points to 6.89 per cent.

“Traders have built short bets in the 10-year bond ahead of the weekly auction, adding to the pressure on bond prices,” a dealer at a primary dealership said.

Traders now eye India’s retail inflation data for October, scheduled to be released on Thursday. A higher-than-expected inflation reading could influence expectations around the RBI’s monetary policy trajectory, while market participants will also track movements in the dollar and foreign portfolio flows for further cues.