MUMBAI, Aug 16 (Reuters) – The Indian rupee lingered in a tight band before closing nearly flat on Friday as most of its Asian peers reversed early losses and mild dollar sales from foreign banks helped the currency hold above its all-time low.
The rupee closed at 83.94 against the U.S. dollar, nearly unchanged from its close of 83.9475 in the previous session. The local unit was nearly flat week-on-week as well.
Dollar sales from foreign banks, likely on behalf of custodial clients, helped support the rupee, a foreign exchange trader at a private bank said.
“State-run banks’ offers (on USD/INR) start to appear every time it moves towards 83.97 so there is limited appetite to go long at these levels,” the trader added.
The Reserve Bank of India has routinely intervened via state-run banks to help the rupee hold above the 84-handle, a psychologically important support level for the currency, traders said.
The currency had declined to its record low of 83.9725 last week, pressured by outflows from local equities and strong dollar demand from importers.
Overseas investors have sold about $2.5 billion of local on a net basis in August so far, according to stock depository data.
The dollar index was down 0.2% at 102.8 while Asian currencies were mostly steady, having trimmed declines from earlier in the day.
The dollar index “is consolidating, but we have a bias for a drop to 102.15/25 next week,” ING Bank said in a note.
Meanwhile, dollar-rupee forward premiums declined with the 1-year implied yield down 5 basis points at 2.05%, pressured by a rise in U.S. bond yields.
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Reporting by Jaspreet Kalra; Editing by Janane Venkatraman
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