Softer dollar, inflows and exporter hedging help rupee brave turbulent month

The Indian rupee braved a number of headwinds in April together with U.S. trade coverage flip-flops and India-Pakistan tensions to return out stronger on the again of inflows into equities and as exporters ramped up greenback gross sales. On the final buying and selling day of the month, the native unit touched its year-to-date excessive and closed at 84.4875 in opposition to the U.S. greenback, up 0.91% on the day, and the very best since November 29.

The foreign money rose 1.2% on the month, its second consecutive month-to-month rise, which helped lengthen a pointy reversal within the rupee’s fortunes after it plumbed to an all-time low of 87.95 in February.

Broad weak spot within the greenback – on the again of issues a few spate of commerce and different coverage modifications beneath U.S. President Donald Trump – helped the rupee after it rallied greater than 2% in March.

The greenback index, in the meantime, was nursing losses of practically 4.5% on the month, its third consecutive month-to-month fall.

A “renewed risk-off in (U.S.) equities mixed with falling front-end yields as Fed fee cuts develop into extra probably will solely reinforce the draw back momentum for the greenback,” MUFG Bank stated in a notice, pointing to the influence of coverage uncertainty. Indian exporters ramped up hedging exercise in April, merchants stated, which additional helped the rupee alongside constructive cues from power in its Asian friends. On the day, merchants pointed to probably inflows into Indian shares, hedging-related greenback gross sales from exporters and a reducing of brief bets on the foreign money because it raced previous a key technical resistance degree.

There have been heavy inflows from U.S.-based banks, whereas the central financial institution was absent and didn’t take in the flows, resulting in a big one-way transfer within the second half of the session, a treasury head at a international financial institution stated.

Constructive sentiment surrounding a possible commerce deal between India and the U.S. was additionally a tailwind for the rupee in direction of the tip of the month at the same time as some merchants cautioned that an escalation in India-Pakistan tensions might renew strain.

On the month, India’s benchmark Nifty 50 equity index was up 3.5% whereas the benchmark 10-year bond yield fell 22 foundation factors.