Rupee closed at 95.21, dropping nearly 1% on the week as merchant payments and NDF maturities kept dollar demand high despite a weaker greenback. Mid-month NDF expiry is next catalyst.
The Indian rupee closed at 95.21 per dollar on Friday, down nearly 1% on the week and slipping past the 95 mark for the first time in three weeks. Dollar demand from merchant payments, maturing non-deliverable forward contracts, and arbitrage trades outweighed support from a weakening U.S. dollar index.
Foreign portfolio inflows into government bonds and expectations of a balance-of-payments surplus for the fiscal year ending March 2027 have improved the medium-term outlook, traders and analysts said. Day-to-day flows still pressure the unit. MUFG wrote in a note that the RBI's foreign-exchange measures – incentives for dollar deposits and overseas borrowings – have started to stabilize the rupee. "USD/INR has been on a rollercoaster ride even before the Iran conflict," MUFG said, citing weak capital inflows and rising foreign direct investment repatriation.
ICICI Bank is weighing its first dollar bond sale in nearly nine years, Reuters reported Friday. HDFC Bank and Axis Bank have already tapped the RBI's lower-cost hedging facility for foreign-currency issuance. A fresh dollar bond from ICICI would add to supply-side pressure on the rupee at a time when NDF maturity and merchant demand dominate.
"It is sticking to the trend of following the dollar higher but lagging on the way down," a trader at a private bank said.
The dollar index fell 0.2% to 100.7 and was on track for its largest weekly loss in 12 weeks after a soft U.S. jobs report cooled expectations for a near-term Federal Reserve rate hike. Markets now price about a 53% chance of a hike at the September meeting, per LSEG data.
AlphaScala's proprietary data shows MUFG with an Alpha Score of 57 (Moderate). HDFC Bank scores 46 (Mixed) and ICICI Bank scores 57 (Moderate). The trio sits in Financial Services, directly exposed to the rupee's trajectory through cross-border funding costs.
The next concrete calendar point is the mid-month settlement period for NDF positions. That will test whether 95.21 holds as a range floor or gives way.
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