Rupee hits six-month peak before retreating on likely central bank intervention
MUMBAI, May 2 (Reuters) - The Indian rupee soared past 84 per U.S. dollar to touch a near six-month peak on Friday before reversing course on the back of likely dollar buying intervention by the central bank, via state-run lenders, traders said.
Strong portfolio inflows and culling of bearish positions on the local currency had hoisted it to a peak of 83.78 earlier in the day, its highest since October 2024, but dollar bids from state-run banks and importers ate into the gains.
The rupee closed at 84.58, down 0.1% on the day. It rose 1% for the week, though, bolstered by inflows into Indian equities and optimism about a U.S.-India trade deal.
U.S. President Donald Trump said earlier this week that he has "potential" trade deals with India, South Korea and Japan.
The rupee's sharp rally over the last two months has pulled it up by over 3%, helping it wipe out most of its losses since Donald Trump's victory in the U.S. elections - and ensuing policy changes - hurt risk assets across the board.
But the currency's sharp moves have also pushed up the rupee's 1-month realised volatility, which has risen to an over two-year peak of 5.1%.
"Volatility may continue to persist with 83.44 acting as a strong base, while 85.60 is a broader resistance," said Kunal Sodhani, vice president at Shinhan Bank India.
The dollar index, meanwhile, was down 0.3% on Friday at 99.8, heading into closely watched U.S. labour market data, due later on Friday.
Asian currencies rose by 0.6% to 1.4% as signs of easing U.S.-China trade tensions sparked optimism following weeks of tumult. The offshore Chinese yuan touched an over one-peak above 7.23 per dollar.
"The dollar's recovery trend could be put on pause today, but may resume soon as US assets can keep benefiting from the more subdued tone on US trade policy," ING Bank said in a note.
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