Indian Rupee Opens Higher but Faces Weekly Pressure Despite Asian Currency Strength

The Indian rupee opened slightly stronger on Friday, supported by gains across Asian currencies. However, traders remained unconvinced about the sustainability of the early move, given the rupee’s recent tendency to give up intraday gains. The 1-month non-deliverable forward suggested an opening in the range of 85.94 to 85.96, a marginal improvement from the previous session’s close of 86.0025.

Despite Friday’s early firmness, the rupee appears set to record its third consecutive weekly loss. It has already declined around 1.8 percent this month, making it one of Asia’s worst-performing currencies. This is in stark contrast to the offshore Chinese yuan, which has appreciated by 1 percent in May, the Korean won with gains nearing 4 percent, and the Indonesian rupiah and Thai baht, both of which have added approximately 2 percent.

The rupee’s recent decline has been driven largely by foreign portfolio outflows from Indian equities, coupled with hedging activities and the unwinding of previously long rupee positions. Over the past three sessions, the currency has consistently closed at or near its intraday lows, signaling persistent downward pressure. 

Meanwhile, most Asian currencies continued to climb on Friday. A rally in regional peers was attributed in part to optimism around possible trade and foreign exchange agreements with the United States. Interestingly, the rise in U.S. Treasury yields due to fiscal concerns has not weighed on Asian currency sentiment this week. 

Back home, attention is also turning to the Reserve Bank of India, which is expected to transfer a substantial dividend to the government. Market expectations place the surplus transfer between Rs 2.2 trillion and Rs 3.1 trillion for the financial year 2024-25. The size and timing of this transfer could influence liquidity conditions and the government’s fiscal position in the coming months.

Data from NSDL showed that foreign investors purchased a net $265.6 million worth of Indian equities and $6.2 million worth of debt instruments on May 21. Meanwhile, other key factors behind the move in USD/INR are that the Brent crude futures traded lower at around $63.9 per barrel, and the dollar index eased to 99.64. The U.S. 10-year Treasury yield hovered near 4.52 percent, reflecting ongoing concerns around fiscal dynamics in the world’s largest economy.

Despite the early gains on Friday, the rupee remains under pressure. A combination of foreign outflows, technical triggers, and cautious sentiment continues to weigh on the currency. While support from Asian peers and softer crude oil prices may offer brief relief, the broader downtrend persists, and traders are watching closely for any signs of a more sustainable reversal.

Disclaimer: This news is solely for educational purposes. The securities/investments quoted here are not recommendatory.

To read the RA disclaimer, please click here