The Indian rupee sidestepped gains in most of its Asian peers to end slightly weaker on Tuesday, weighed down by dollar demand from local oil companies and foreign banks.
The rupee ended at 83.15 against the U.S. dollar, down 0.1% compared to its previous close of 83.0650.
The dollar index was lower at 103.25 while most Asian currencies gained. The Japanese yen was up nearly 0.2% after the Bank of Japan maintained its ultra-easy monetary settings on Tuesday but gave hints that the policy might be tweaked at its next meeting.
The offshore Chinese yuan also rose by 0.3%, aided by likely central bank intervention, even as the country’s stock markets fell.
Dollar demand from local oil companies and foreign banks, likely on behalf of custodian clients, kept up pressure on the rupee despite the positive global cues, a foreign exchange trader at a state-run bank said.
Meanwhile, benchmark Indian equity indices, the BSE Sensex and the Nifty 50, ended the day lower by 1.47% and 1.54% respectively.
The local currency seems to be “inching lower” and the “weakness in equities is likely to continue weighing on the rupee,” Gaurang Somaiya, a foreign exchange research analyst at Motilal Oswal Financial Services said.
Overseas investors sold Indian equities worth $2.4 billion on Wednesday and Thursday last week, according to latest stock depository data.
Meanwhile, the paring of aggressive bets on interest rate cuts by the U.S. Federal Reserve may also prove to be a near-term drag for emerging market currencies.
Investors are currently pricing in a 56.5% chance that the Fed will keep rates unchanged in March, up from nearly 35% a week earlier, according to CME’s FedWatch tool.
