UAE: Indian rupee little changed against dirham in early trade

The equity market is 'nervous' about the general election results, due on June 4, which is likely to maintain some pressure on the South Asian currency, expert says

Web Desk

Published: Fri 10 May 2024, 10:10 AM

The Indian rupee was little changed on Friday as dollar demand from oil companies and tepid sentiment surrounding equities offset positive cues from a dip in US bond yields.

The South Asian currency was at 83.4850 against the US dollar (22.747 against the UAE dirham) as of 8.40am, UAE time, barely changed from its closing rate of 83.5025 (22.75).

"General dollar buying pressure has been there for the last few days but I don't think the rupee will see significant moves as the RBI should be there below 83.50," a foreign exchange trader at a foreign bank said.

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Traders expect the central bank's interventions will keep sharp declines in the rupee at bay.

"The equity market is nervous" about the general election results, due on June 4, which is likely to maintain some pressure on the South Asian currency, the trader added.

Concerns over the results have prompted foreign investors to pull out about $2 billion from Indian equities in May so far.

Benchmark Indian equity indices, the BSE Sensex and Nifty 50, were in the green on Friday after falling 1.4 and 1.5 per cent, respectively, in the previous session.

"There could be modest knee-jerk weakness in INR FX and risk assets if BJP (India's ruling party) loses some seats and maintains a majority," MUFG Bank said in a Friday note.

"Conversely, a greater seat share win ... will be perceived much more positively by markets, with INR FX and risk assets likely rallying in the aftermath."

The dollar index was at 105.3 after declining about 0.3% on Thursday as U.S. jobless claims rose more than expected, signalling softness in the labour market. Most Asian currencies were rangebound.

US bond yields also dipped as odds of a September rate cut by the Federal Reserve inched up to 67 per cent, up from 62 per cent a week before, according to the CME's FedWatch tool.

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