The Indian rupee fell slightly on Friday but outperformed other Asian currencies, thanks to consistent foreign investment inflows into domestic equities. By 11:28 AM IST, the rupee dropped to 82.0250 against the US dollar, down from 81.95 in the previous session. The losses in the domestic unit were relatively small compared to Asian peers such as the Korean won, which fell by 0.7%; offshore Chinese, which reached a new year-to-date low; and the Indonesian rupiah and Malaysian ringgit, which both declined by 0.4%. Forex salespeople at a private bank attributed the outperformance to equity flows and lack of speculative interest given low volatility.
Foreign investors have reportedly invested $2.5bn into Indian equities in the last seven sessions, according to data from NSDL, leading the BSE Sensex to reach a record high earlier in the week. While Asian currencies have been impacted by China’s faltering post-pandemic economy and hawkish central banks, India has managed to avoid a similar fate. Concerns over inflation created by central banks worldwide, such as Norway’s and the UK’s, have also added to the pressure on emerging market currencies, driving up the dollar index to 102.66. There are fears that the tighter monetary policies of European central banks could impact global economic growth, leading to a safe-haven move back into the dollar.
Ed Moya, senior market analyst at broker OANDA, explained that bigger-than-expected tightening across European central banks is affecting global growth outlook. He further warned that this could trigger a safe-haven move back into the dollar.
