Indian Rupee Ignores Stocks Rally and Ends Down as Dollar Strengthens

The Indian rupee ended weaker on 11 August as a broader dollar rally outperformed the rally in local stocks, while profit booking after the sharp gains on Friday may have also weighed on the local unit.

The USD/INR ended at 61.17 from the close on 8 August of 61.15 and off an intra-day low of 61.03.

The pair had touched a five-month high of 61.75 before a central bank-assisted reversal helped the rupee end nearly 1% stronger.

"There was some corporate selling in the pair initially," K Chandrangathen, chief forex dealer at South Indian Bank, told IBTimes UK.

"But by the end of the day, overall dollar strength must have played."

There seemed to be some profit booking in the rupee initially but that was not a factor in the afternoon, he added.

Traders said the central bank support, likely to be around 62/$, may keep some speculative buyers away but there were technical as well as fundamental reasons for the Indian unit to weaken further.

"I see 60.70 as a crucial level. A close below that will be a bearish signal for the pair," Chandrangathen said.

India's main stock indices ended more than 0.7% higher on 11 August as geopolitical worries eased and aided a global stock rally.

The USD index, the gauge that measures the dollar's strength against other major currencies on a trade-weighed basis, rose to 81.48 from 81.40 at Friday's close.

Over the weekend, India's stock market regulator SEBI approved real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in a move that will ease the access of funds to developers and open up new investment avenues to Indian as well as foreign investors.

Property stocks such as Jaypee Infratech and DLF were among major gainers on 11 August.

Rupee traders said the forex market will wait for more clarity in terms of taxation and lower domestic interest rates to see any significant impact of the SEBI move in favour of the rupee.

Technical Outlook

Below the 60.70 mark, the pair may have support at 60.10 and then at 59.60. They will then eye 58.90 ahead of 58.20, the May low.

On the higher side, 61.75 remains the first target and then 62.80. Further north, 63.50 is the level to watch ahead of the psychologically important 64.00 mark.