The Indian rupee may open stronger on Friday, supported by broad-based gains in Asian currencies, but doubts remain about the sustainability of any rebound. The 1-month non-deliverable forward (NDF) suggests an opening range of 85.94 to 85.96, compared to 86.0025 in the previous session.
Despite the slight reprieve, the rupee is headed for its third consecutive weekly loss, having fallen over 1.5% in May — placing it among the worst-performing Asian currencies.
In contrast, other regional peers have performed much better:
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Offshore Chinese yuan: +1%
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Korean won: +4%
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Indonesian rupiah and Thai baht: +2% each
The rupee’s underperformance is attributed to dollar outflows, increased hedging, and unwinding of long rupee positions. Adding to concerns, the currency has consistently closed at its intraday low for the past three sessions, highlighting sustained selling pressure.
“The rupee’s recent behaviour has been unusual, to say the least. Like me, I’m sure most didn’t expect to see 86 this quickly,” said a Mumbai-based currency trader.
Although fiscal concerns in the U.S. have dragged the dollar lower, which could offer some support to the rupee, traders remain skeptical about whether this will lead to a lasting uptrend in USD/INR.
“The odds are stacked against the opening move lower sustaining, considering the lack of staying power seen in recent dips,” the trader added.
Asia FX Continues Uptrend
Asian currencies extended their gains on Friday, with traders citing optimism over potential trade and FX agreements with the U.S.. According to MUFG Bank, the rise in U.S. Treasury yields due to fiscal concerns has not impacted the bullish momentum in Asia’s currency markets.
However, MUFG cautioned that this divergence may not last, depending on how tariff policies evolve and whether higher yields start to dampen global growth and investor sentiment.
