The rupee recorded its biggest single-day jump since June 3 on Monday due to foreign inflows after rebalancing of MSCI global indices, slight weakening of the dollar index and softening of US yields, said market participants. Additionally, lower fixing of the yuan by the People’s Bank of China (PBOC) compared with its previous close supported the Indian rupee and other emerging market currencies.
The rupee closed at 84.286 a dollar against 84.455 a dollar – up 17 paise. The rebalancing of MSCI’s global equity indices will be effective after markets close on Monday.
Globally, US yields and the dollar index were a tad down after Donald Trump nominates Scott Bessent for the post of Treasury secretary. Bessent is expected to keep a steady hand on government finances, hence seen as a favorable choice for the markets.
The dollar index was at 106.8, down 0.5% from its closing level on Friday. US yields were lower with the 10-year yield down 7 basis points at 4.34%.
Earlier in the day, PBOC fixed the rate of the yuan at 7.192%, against 7.194% on Friday. This led to some inflows in the market, giving positive push to the rupee. “Yuan was moving up and suddenly the fixing came lower, giving a hint to the market that it may fix it further lower gradually. That’s why mostly all EMs have performed well on Monday,” a dealer with a private bank said.
For a week, the market is likely to guage the movement in the Chinese currency. Investors now await the minutes of the Federal Reserve’s November meeting and core US PCE inflation figures, both due on Wednesday.
Moreover, traders unwound their long bets on dollars as the Reserve Bank of India (RBI) instructed banks not to take any speculative bets on dollar-rupee pair. “Traders are not placing any aggressive long bets. During the day, foreign banks sold dollar, later they were joined by domestic players as well, giving support to the rupee,” a dealer with a state-owned bank said.
The RBI instructed some banks to cut their long positions on the dollar-rupee pair on Friday as the domestic currency was then trading at a record low. The rupee weakened to a record low of 84.507/$, pressured by portfolio outflows and a stronger greenback.
» Read More
