The Indian rupee experienced a modest increase on Friday due to inflows into domestic stocks, although the gains were constrained by importers' demand for dollars. By 8.55am UAE time, the rupee stood at 83.84 (Dh22.84) against the US dollar, slightly up from its previous close at 83.87 (Dh22.85). Despite anticipated inflows stemming from India's heightened presence in MSCI's emerging market equity index, the rupee's gains were capped by robust demand for dollars from local importers, according to a foreign exchange trader at a state-run bank.
The increased weighting of Indian equities, which took effect on Friday, is projected to attract up to $3 billion in inflows, as per Nuvama Alternative and Quantitative Research. India's benchmark equity indexes, the BSE Sensex (BSESN) and Nifty 50 (NSEI), reached new highs in early trading, each rising about 0.2 percent. Amit Pabari, managing director at CR Forex, anticipates that the rupee will fluctuate between 83.75 and 83.90, with a slight upward bias.
The dollar index remained stable at 101.3, while most Asian currencies declined, except for the offshore Chinese yuan, which strengthened by 0.2 percent to 7.08, its highest level since June 2023. Additionally, dollar-rupee forward premiums decreased, influenced by a rise in US bond yields following Thursday's data release, which alleviated concerns about economic slowdown. The 1-year implied yield fell by 2 basis points to 2.14 percent.
Key indicators to watch include the US PCE inflation data due later on Friday and labor market data scheduled for next week, which will likely influence expectations for US rate cuts ahead of the Federal Reserve's September meeting. Post-market, India's GDP data for the April-June quarter is set to be released, expected to reveal a slowdown in economic growth to its lowest rate in a year, according to a Reuters poll.
