USD/INR: Rupee slips amid Yuan-led retreat but losses seen limited

Key points

India’s Rupee was a notch weaker against the US Dollar on Wednesday amid a Yuan-driven retreat in Asian currencies.

The offshore Yuan was looking at a fourth straight day of losses against the US Dollar, undermined by concerns over China’s economic recovery outlook as several brokerages have already revised down their full-year GDP growth forecasts this week.

The USD/CNH pair was last up 0.36% on the day to trade at 7.2187, extending a rebound from a one-month low of 7.1223 registered on July 14th.

The resumption of upward movement in USD/CNH may impact considerably other Asian currencies, including the Rupee, according to Anindya Banerjee, head of research – Forex and interest rates at Kotak Securities.

Still, the Indian currency “may find support from robust foreign portfolio investment inflows. The result – USD/INR is expected to trade within a range of 81.90 to 82.22/25 levels,” according to Banerjee.

NSDL data showed that over $4 billion had been invested in Indian shares by foreigners so far in July.

The US Dollar Index was last up 0.22% on Wednesday to 100.145.

Market players largely expect a 25 basis point interest rate hike by the Federal Reserve at its policy meeting next week, followed by an extended pause.

As of 8:29 GMT on Wednesday USD/INR was edging up 0.10% to trade at 82.1200. Last Friday, the exotic Forex pair went down as low as 81.9400. The latter has been the pair’s weakest level since July 5th (81.9260).