Rupee Breaks Six-Day Winning Streak, Closes at 93.9275/$
The Indian rupee ended Monday at 93.9275 per US dollar, slipping from 93.9050 as dollar purchases by state-run banks offset recent gains. Currency markets in India are closed Tuesday for a holiday, and a key US inflation reading is due that evening.
The Indian rupee broke its six-day winning streak on Monday, November 9, closing at 93.9275 per US dollar as purchases of dollars by state-run banks outweighed recent momentum. The currency ended slightly lower from Friday's close of 93.9050.
Trading volumes were thin. Indian foreign exchange markets will be closed on Tuesday for a local holiday.
Six-month high, then a pullback
Earlier in the session the rupee touched 93.69 per dollar, a six-month high. That extended last week's rally of more than 1%.
Some traders said the state-run banks' dollar purchases could have been made on behalf of the central bank. They said recent measures by the Reserve Bank of India have helped ease the persistent gap between dollar supply and demand in the currency market.
A fall in crude oil prices also eased pressure on the rupee. India imports most of its oil, and foreign investors returned to Indian equities.
Why gains may be capped
Madhavi Arora of Emkay Global expects the Reserve Bank of India to use any lasting improvement in inflows to rebuild its foreign exchange reserves. She does not expect it to let the rupee appreciate sharply.
The central bank's large net short position in dollar forwards is one limit, she said. India's continuing need to fund its current account deficit is another. A forward contract is an agreement to deliver dollars at a future date.
That net short position reached an all-time high of nearly $240 billion in September, according to the data cited. It leaves the central bank with substantial future dollar commitments.
US data in focus
The dollar has strengthened after a stronger-than-expected US jobs report for October. Non-farm payrolls rose by 165,000 against expectations of 65,000, and the US 10-year Treasury yield moved higher.
"The US dollar has strengthened following a stronger-than-expected October jobs report," said Amit Pabari, managing director at foreign exchange advisory firm CR Forex.
US retail inflation data for October is due on Tuesday evening. A poll of economists shows it likely stood at 3.9% on the year.
"A higher-than-expected reading could strengthen expectations of another Federal Reserve rate hike and provide fresh support to the dollar," Pabari added.
