Foreign banks lean against broad dollar demand, pin rupee near 87/dollar
The rupee was at 87.0575 to the U.S. dollar at 10:52 a.m. IST, after trading between 87.1650 and 87.0050 through the session.
Traders said foreign banks were active on offers for USD/INR, preventing the pair from pushing higher despite weaker Asian peers and hedging by importers.
"There's no shortage of dollar buyers. However, foreign banks have been hitting offers again, which is most likely driven by client flows," a currency trader said.
"That's kept it (USD/INR) from moving up, like I had expected."
Fading risks of an upside breakout in USD/INR, a rally in local equities and position squaring have helped the Indian currency recover after recent pressure.
In recent weeks, the rupee's direction has been dictated largely by domestic factors. News around U.S. tariffs on India has been a key driver, and more recently by S&P's upgrade of India's credit rating outlook and Prime Minister Narendra Modi's planned tax cuts on goods and services.
On tariff-related news, U.S. Treasury Secretary Scott Bessent on Tuesday accused India of profiteering from its purchases of Russian oil during the war in Ukraine.
His comments come at a time when U.S.-India relations are strained, with President Donald Trump imposing additional tariffs on New Delhi over Russian oil purchases. The tariffs are set to take effect next Wednesday.
Meanwhile, other Asian currencies weakened on the day, while the dollar index inched higher. The key event this week is Federal Reserve Chair Jerome Powell's speech at Jackson Hole, Wyoming, on Friday.
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