The rupee held steady on Friday even as most Asian currencies strengthened against a weaker dollar which was set for weekly loss as investors brace for a slower pace of Federal Reserve rate hikes as early as next month.
After opening at 81.6763 per dollar, the rupee was last changing hands at 81.6963, compared to its previous close of 81.6275, according to Bloomberg.
PTI reported that the rupee provisionally ended flat at 81.70 against the US dollar.
“The rupee rose today after staying in a tight range of 81.65 to 81.90 in the last 5 days. At a higher level of the domestic currency, i.e. 81.43, there was some good dollar buying as cash dollar shortage continues to hamper the rupee’s rise,” said Anil Kumar Bhansali, Head of Treasury at Finrex Treasury Advisors.
While the domestic currency initially struggled to break through a key resistance level of 81.50 per dollar, it managed to breach that level in the afternoon.
But with demand for dollars high, the currency fell back to beyond 81.50.
The sentiment is generally risk-positive, a trader at a private bank told Reuters, adding that the rupee’s trend was rangebound, and it was unlikely to appreciate further sharply, with the domestic currency steady at around the 81.40-81.45 range in the near term.
The rupee, as a result, has underperformed its Asian counterparts this week by holding in a very small range of 81.50 to 81.90 per dollar, despite the greenback’s broad decline.
Trading volumes were light overnight because of the Thanksgiving holiday in US markets, but the focus remained on a weaker dollar.
“More and more market participants are getting confident that the peak in long-term yields is passed, and we are slowly moving toward a Fed pause,” Naka Matsuzawa, Chief Japan Macro Strategist at Nomura in Tokyo, told Reuters.
The possibility of the Federal Reserve halting the tightening of monetary policy starting as early as December caused the dollar index to continue its downward trend and drop close to a three-month low of 105.750 and down 5.5 per cent for the month.
“We’ve still got the third successive day of positive risk sentiment…I think that is keeping the US dollar subdued pretty much across the board,” Ray Attrill, Head of FX Strategy at National Australia Bank, told Reuters.
Despite the improved sentiment in global markets, investors were concerned about stringent lockdowns in China and the impact on supply chains, which weighed on the yuan.
Chinese cities implemented localised lockdowns, mass testing, and other limits, shattering recent hopes that the world’s second-largest economy would abandon tight zero-Covid rules and accept the disease.
“Investors are right to be worried,” said Rob Carnell, Regional Head of Research for Asia-Pacific at ING.
“China doesn’t have the adequate health network that they would be able to deal with a full-on outbreak with lots of people getting sick. Sort of medium-term living with Covid is a nice dream, but how do you get there?” he added.
According to Reuters, the offshore Chinese yuan was last at 7.1662 to the dollar and was on track to suffer a second weekly loss.
Featured Video Of The Day
Sensex Surges Over 1,150 Points As Global Risk Sentiment Improves