The dollar index was at 105.3, while most Asian currencies declined, with the Indonesian rupiah falling to a four-year low and the Chinese yuan slightly lower at 7.28, its weakest level since November 2023.
Weakness in the yuan may keep some pressure on the rupee during the day but the broad bias is tilted higher, a foreign exchange trader at a foreign bank said.
Traders expect inflows into India’s sovereign bonds on account of India’s inclusion in the JPMorgan emerging market debt index later this month to support gains in the rupee alongside flows into local equities.
Foreign investors bought local stocks worth about $948 million on a net basis on Wednesday, according to provisional exchange data.
Foreign inflows into Indian bonds are expected to hit a decade-high of $2 billion around June 28 when they will be included in a widely tracked JPMorgan index.
“While external factors have capped further gains, the outlook for the rupee remains stable,” said Amit Pabari, managing director at FX advisory firm CR Forex.
Investors will now keep an eye on U.S. jobless claims data which may offer cues on the future path of the Federal Reserve’s policy rates.
Interest rate futures are currently pricing in nearly a 64% chance of a rate cut in September, according to the CME’s FedWatch tool.
(Reporting by Jaspreet Kalra; Editing by Sohini Goswami)
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