The Indian rupee ended modestly higher on Friday yet recorded a weekly decline, as demand for dollars from merchant transactions, arbitrage trades and non-deliverable forward maturities offset support from a softer US currency. The rupee fell nearly 1 percent over the week to finish at 95.21 per dollar, moving past the 95 level for the first time in three weeks. Stronger foreign portfolio inflows into government bonds and forecasts of a balance of payments surplus through March 2027 have lifted sentiment, although daily flows continue to weigh on the currency, according to traders and analysts. USD/INR has experienced volatility driven by limited capital inflows and higher foreign direct investment repatriation, though Reserve Bank of India measures have begun to stabilize the unit, MUFG noted. These steps include incentives for dollar deposits and overseas borrowings. ICICI Bank is considering its first dollar bond issue in nearly nine years, following similar moves by HDFC Bank and Axis Bank that used the central bank’s hedging facility. During the week, maturing NDF positions and large merchant payments added pressure. The unit has tracked the dollar higher but lagged on declines, a private bank trader observed. The dollar index fell 0.2 percent to 100.7 and is set for its largest weekly drop in 12 weeks after weak US jobs data reduced expectations for a near-term Federal Reserve rate increase. Markets now price in about a 53 percent chance of a hike at the September meeting.
