Rupee ends month and quarter a tad lower, trails most Asian peers

Yahoo

5 hours ago

(Refiles to fix dateline to June 30)
By Jaspreet Kalra
MUMBAI (Reuters) - The Indian rupee slipped on Monday to end the month and quarter slightly lower, trailing most Asian peers amid muted portfolio inflows and weighed down by the country's external investment deficit.
The currency closed at 85.7550 against the U.S. dollar, down 0.3% on the day and posted modest losses of 0.2% and 0.3% respectively for the month and quarter, underperforming most Asian peers amid a broad dollar downtrend.
While the Indian unit is little changed on the year so far, Asian peers such as the Taiwan dollar and Korean won have risen about nearly 13% and 8% year-to-date, respectively, while the offshore Chinese yuan, a closely tracked peer of the rupee, is up over 2%.
India's external investment deficit is among the key reasons cited by analysts behind the rupee's underperformance.
The external investment positions of Asian countries have come into focus as investors ramp up hedge against persistent weakness in the dollar, thereby boosting currencies of countries with sizeable investment surpluses, like Korea and Taiwan.
The dollar index is down over 10% on the year so far, bogged down by worries over U.S. trade and fiscal policies, worries over the future independence of the Federal Reserve and expectations of upcoming cuts to benchmark interest rates.
Muted portfolio flows have also been a sore point for the rupee with foreign investors net pulling about $0.5 billion from local stocks and bonds over the April-June quarter.
Despite the relative underperformance, analysts expect a broadly weaker dollar to support the rupee.
"We see scope for USD/INR to consolidate in an 84-86 range with a downside bias," DBS said in a note, adding that it would consider lowering USD/INR's forecast if the US Federal Reserve pivots towards a rate cut later this year and sets the stage for more USD weakness.
On the day, traders said that dollar bids from foreign bank and state-run banks weighed on the rupee even as most of its Asian peers logged gains.