The rupee also faced pressure as demand for the safe-haven dollar increased after US Federal Reserve Chairman Jerome Powell clarified that there were no immediate signs of a sharp cut in benchmark interest rates due to the strength of the economy.
The currency gained 0.06% from its previous close of 84.49 per dollar, LSEG data showed. The dollar index, which was at a two-year high of 108.09, strengthened as the euro and British pound retreated on weak economic data from Germany and the UK.
“With the dollar index and US yields strong, I do not expect the rupee to gain much from here. For Monday, I expect the rupee to range between 84.30 and 84.60/$1,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
So far in November, the local currency has weakened about 0.5% as foreign investors sold $4 billion from Indian stocks and bonds, depository data showed.
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Uncertainty over the rate of tapering by the US Fed in December has further prompted foreign investors to withdraw funds from emerging markets such as India, boosting safe-haven demand for the greenback.
According to CME’s FedWatch tool, the probability of a 25 basis point rate cut by the US Fed is 60%.
A basis point is one hundredth of a percentage point.
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