By Jaspreet Kalra
MUMBAI (Reuters) -The rupee closed nearly unchanged on Wednesday, easing off a two-week high as importer dollar demand ate into gains spurred by a pick up in exporter flows and a mildly bullish bias among interbank traders.
The rupee ended the session at 88.5875 against the U.S. dollar, up marginally from its close of 88.6050 in the previous session.
The currency climbed to a peak of 88.4250 in early trading, but shed much of its gains in the latter half of the session. A trader at a private bank cited dollar demand from importers and modest portfolio outflows as key contributors to the pressure.
Offshore market participants, meanwhile, have opted to use options to position for a potential rally in the Indian rupee, encouraged by Wall Street banks promoting strategies built on the prospect of a U.S-India trade deal.
Both New Delhi and Washington have indicated that an agreement is close. Analysts reckon that a breakthrough in negotiations could spark a rebound in the rupee and spur inflows into local stocks.
A dip in most Asian currencies also weighed on the local unit on Wednesday.
The dollar swung between gains and losses against major peers as investors awaited key U.S. economic data and commentary from Federal Reserve officials to gauge the U.S. monetary policy path.
Analysts at MUFG said in a note that the dollar’s sensitivity to intra-day moves in U.S. equity markets has increased, which could heighten the impact of quarterly earnings from chip titan Nvidia, due later in the day.
“Given the current positive correlation between equities and the dollar (which reflects perhaps the renewed concerns over a tech/AI-specific correction hitting the broader US economy) a bad earnings report this evening could drive the dollar weaker,” the firm said.
(Reporting by Jaspreet Kalra; Editing by Sonia Cheema)
