Bears bail as inflows boost Indian rupee to near two-month high

The Indian rupee hit a near two-month high on Thursday, boosted by dollar sales by foreign banks and the culling of bearish wagers as seasonal inflows propped up the currency.

The rupee touched a high of 86.2075, its best since January 24, marking a 1.2% appreciation over the past seven trading sessions. The currency was last quoted at 86.29, up 0.2% on the day.

Traders have attributed the rupee's recent rally primarily to dollar sales by foreign banks, likely on behalf of their clients.

While specific inflows were not identified, March typically sees corporate flows related to intercompany loans and profit repatriation.

The recent inflows likely triggered the unwinding of 'structural' long dollar/rupee positions in the onshore over-the-counter and in the non-deliverable forward market, further strengthening the Indian currency, a currency trader at a Mumbai-based bank said.

This marks a significant reversal for the rupee, which was under sustained pressure until mid-February due to equity outflows and a slowdown in domestic growth.

DOLLAR'S STRUGGLES

The rupee has also benefited from a weaker dollar, fuelled by concerns of a U.S. economic slowdown. The Federal Reserve on Wednesday lowered 2025 GDP projections while increasing its inflation expectations.

The dollar index is currently near its lowest level this year. Concerns about U.S. President Donald Trump's tariff policies have dented investor confidence about the U.S. economy and the dollar.

Fed Chair Jerome Powell said on Wednesday that uncertainty at present is "unusually elevated" amid new rapid-fire policies by Trump.

He made these remarks at a press conference following the Fed meeting where the central bank held interest rates steady, as expected.

Fed policymakers projected two rate cuts for the year, consistent with their December forecast.