Rupee rises as Asian currencies appreciate, foreign inflows continue

The Indian rupee reached a more-than-two-month-high on Tuesday, supported by dollar inflows and the Chinese yuan's advance.

The rupee opened at 81.71 per US dollar, tracking the rise in Asian currencies. The yuan fell to CNY 7.13, compared to 7.21 on Monday at the close of the Indian foreign exchange market.

The rupee settled at 81.83 per dollar on Monday. Steady foreign inflows in domestic equities aided the Indian unit. “We are mainly tracking Chinese Yuan,” said a dealer at a state-owned bank. “The central bank is not protecting the levels, yesterday (Monday) everyone thought that they might intervene at around Rs 81.80 per US dollar. If there is no intervention, the rupee should settle around Rs 81.60 per US dollar.”

Numbers for the US Purchasing Managers’ Index (PMI) were mixed in July which kept the dollar index around 101.26.

The manufacturing PMI came in at 49, against the expectations of 46. The service PMI declined to 52.4, which was lower than expected level of 54.

“If the USDINR sinks below Rs 81.55 per US dollar levels (a major support zone), the fundamentals are likely to drive the pair thereon instead of RBI,” said Amit Pabari, managing director at CR Forex, referring to the Reserve Bank of India.

“A breakdown below the same would trigger stop-loss and lead to further plunging towards Rs 81.20-80.90 per US dollar levels. On the upside, Rs 82.20 per US dollar shall act as a strong resistance zone for the pair,” he said.