By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee is on track to log its best monthly gain since November 2018, boosted by seasonal and portfolio dollar inflows alongside a drop in bearish positions on the currency.
The local unit has rallied over 2% this month so far, outperforming its major regional peers, and was last up 0.2% on the day at 85.5875 per U.S. dollar, with traders pointing to dollar sales from foreign and local private banks.
After struggling near record-low levels until mid-February, the rupee has staged a sharp recovery to trade nearly flat on the year.
It “appears that longs (on USD/INR) have been exiting after custodial inflows started to hit,” a salesperson at a large foreign bank said, referring to an easing of bearish bets on the local currency.
Following an extended period of outflows that kicked off in October last year, the direction of foreign portfolio flows appears to have reversed over the last few days.
On Thursday, foreign investors bought Indian equities worth over $1.2 billion, taking their total purchases over the past six sessions to $6 billion.
Indian bonds, meanwhile, have seen inflows worth $3 billion so far in March, as overseas investors have stepped up purchases ahead of an anticipated cut in central bank policy rates in April.
However, the focus is likely to shift towards U.S. tariff announcements next week. The White House is set to announce reciprocal trade levies on April 2.
India, meanwhile, is eyeing tariff cuts on more than half of its U.S. imports, looking to mitigate the impact of reciprocal tariffs, Reuters has reported.
“Any adverse or aggressive tariff announcement will limit the room for further rupee gains,” DBS Bank said in a note.
(Reporting by Jaspreet Kalra; Editing by Savio D’Souza)
