The rupee ends virtually unchanged, locked in mixed flows

The Indian rupee’s rate was little changed on Monday as usual dollar demand offset inflows, keeping the currency largely within range at the start of the week.The rupee moved in a narrow band of 10 paise to end at 90.65 against the previous close of 90.6350.

The rupee had risen earlier this month, supported by optimism over the US-India trade deal, but has returned to following flow dynamics and external signals.Dollar sales by exporters and foreign portfolio inflows helped push the currency up 1.5% in February.

However, that support could weaken.

“The rupee is not racing. It is waiting,” said Amit Pabari, managing director of FX consultancy CR Forex.

From a technical perspective, the 90.00-90.20 zone remains a key support for USD/INR and a gradual move towards 91.00-91.20 remains possible in the near term, he said. While foreign investors remain net buyers of Indian stocks so far, they raised more than $800 million on Friday, underscoring that capital flows remain choppy.

Softer-than-expected inflation in the US has increased the chances of at least two more rate cuts from the Federal Reserve.

Citi said in a note that fears of a sustained and rapid depreciation of the rupee appear to have been allayed, which should be positive for equity investors.

Some investors are willing to consider the rupee’s outperformance on a relative basis even if there is no absolute valuation bias, the brokerage said.