The rupee ends slightly lower as modest inflows offset resistance from the firmer dollar

The Indian rupee closed slightly weaker on Thursday, pressured by the dollar’s broad-based strength following an aggressive reassessment of policy easing by the Federal Reserve, while modest portfolio inflows helped limit the currency’s decline.The rupee closed at 88.7050 against the US dollar, down around 0.1% on the day.

The dollar index held above the 100 handle while Asian currencies fell between 0.1% and 0.3% as traders scaled back bets on a US interest rate cut next month.Minutes from the Fed’s October policy meeting showed that many policymakers opposed a rate cut in December, leading to a drop in the probability of a money market cut from 50% a week earlier to less than 30%.

While the aggressive turn weighed on regional currencies, global stocks took solace in Nvidia’s earnings results, sending MSCI’s index of Asian shares outside Japan up 1%.

India’s stock indices, the BSE Sensex and Nifty 50, also rose about 0.5% each, boosted by heavyweight Reliance Industries. Foreign banks’ dollar turnover picked up in the second half of the trading session, indicating likely inflows, a trader at a state-owned bank said. The indexes are within reach of their record highs set in September last year, with HSBC expecting the Sensex to rise to 94,000 by 2019. by the end of 2026, an increase of approximately 10% from current levels.

Analysts believe a breakthrough in US-India trade talks could fuel inflows into local equities and a rally in the rupee. Wall Street banks have recently deployed options strategies on the rupee to position themselves for it.

“Momentum is gradually shifting in favor of the rupee. Positive cues from US-India trade developments, lower crude oil prices and gains in domestic equities are gradually strengthening sentiment,” said Amit Pabari, director of currency consultancy CR Forex.