Rupee supported by foreign inflows as dollar holds near one-month high

what happened

According to Reuters, the rupee is expected to open largely flat on Thursday, in a range of 93.68 to 93.74 per dollar. It settled at 93.69 on Wednesday, its strongest level since April. Foreign investors put 1.34 billion dollars into Indian equities on Wednesday, and month-to-date inflows approached 8 billion. Investors have been reducing exposure to semiconductor-heavy markets over fears of tighter US curbs on AI data-centre construction after the Democratic election win, and are moving money into India as a diversification play. Lower oil also helps: Brent is near 92 dollars a barrel, down from a 118-dollar high less than two weeks ago.

why it matters

Foreign investors had pulled more than 30 billion dollars from Indian equities earlier this year, so the durability of the turnaround is the open question. The dollar index is near a one-month high, with traders adding to bets on further Federal Reserve tightening after higher-than-expected October inflation in the US, which limits the rupee's gains.

market impact

Rupee and Indian stocks: foreign inflows support them; a firmer dollar on Fed hike bets weighs on both

• ▲Rupee (USD/INR) pressure up — foreign equity inflows into India support the currency
• ▲Indian equities pressure up — foreign investors return, redirecting money from semiconductor markets
• ▲Dollar index pressure up — expectations of further Fed rate hikes after strong inflation data

tags

instruments