Rupee to bypass recovery in Asian peers on worries over outflows

By Nimesh Vora
MUMBAI, Nov 29 (Reuters) – The Indian rupee is likely to hover near its all-time low on Friday as concerns about portfolio outflows override the recovery in Asian peers.
The 1-month non-deliverable forward indicated the rupee will open at 84.4850-84.4950 to the U.S. dollar, nearly unchanged from its close on Thursday and near the lifetime low of 84.5075 hit late last week.
Foreign investors took out nearly $1.4 billion from Indian equities on Thursday, preliminary exchange data showed, spurring a 1.5% slump in the BSE Sensex index.
These investors took out $11 billion from Indian equities last month. While the outflows have persisted this month, the pace has slowed.
Indian companies’ worst quarterly performance in over four years in the July-September period amid what economists say is a cyclical slowdown has prompted foreign investors to reassess their exposure to Asia’s third-largest economy.
These outflows, along with the rise in U.S. Treasury yields and the dollar since Donald Trump’s U.S. election victory earlier this month, have pressured the rupee.
To support the currency, the Reserve Bank of India has directly intervened by selling dollars in the spot market. It has also asked banks to lower their speculative bets against the currency and has increased its scrutiny of lenders’ forex activity.
The RBI’s dollar sales, however, have prompted India’s forex reserves to plunge.
The central bank sold dollars on Wednesday and Thursday to prevent the rupee from dropping past 84.50.
That is “currently seen as a level that the RBI will, at all lengths, defend”, a currency trader at a bank said.
ASIAN PEERS RISE
The rupee’s Asian peers were up on the day, while the dollar index slipped below 106, largely due to a rally in the Japanese yen on bets of a Bank of Japan rate hike next month.
KEY INDICATORS:
** One-month non-deliverable rupee forward at 84.62; onshore one-month forward premium at 12.5 paisa
** Dollar index down at 105.85
** Brent crude futures down 0.1% at $73.2 per barrel
** Ten-year U.S. note yield at 4.25%
** As per NSDL data, foreign investors sold a net $124.2 mln worth of Indian shares on Nov. 27
** NSDL data shows foreign investors sold a net $48.9 mln worth of Indian bonds on Nov. 27
(Reporting by Nimesh Vora; Editing by Savio D’Souza)