MUMBAI, September 04 (Reuters) – The Indian rupee ended modestly lower on Thursday as dollar demand from local oil companies and foreign banks weighed on the currency even as firm expectations of a rate cut by the U.S. Federal Reserve kept the greenback on the defensive.
The rupee closed at 88.1450 against the U.S. dollar, down slightly from its close of 88.07 in the previous session.
While the local unit had nudged higher to 88.0075 in early trading, importers stepped in to buy dollars around that level alongside foreign banks, which pulled it back down, traders said.
Equity inflows have been persistent, but they “are not very sizeable on a daily basis,” a trader at a state-run bank said.
The absence of chunky outflows from local stocks has helped the currency stay steady after hitting a record low of 88.33 on September 1, the trader said.
Foreign investors have sold $1.3 billion of local stocks on a net basis in September so far, while government bonds accessible to foreigner have logged modest inflows.
India’s benchmark equity indexes, the BSE Sensex and Nifty 50 ended slightly higher, helped by the government lowering consumption taxes to revive local demand and cushion the blow from steep U.S. tariffs.
“Going ahead, given near-term uncertainties, we expect USD/INR to trade in the 87.75-88.50 range,” analysts at Kotak Mahindra Bank said in a note.
The U.S. dollar was steady against major peers on Thursday as investors awaited surveys on U.S. private sector employment and monthly layoffs, due later in the day.
U.S. labour market data, culminating in the crucial jobs report due on Friday, is expected to influence expectations of Fed policy easing.
Money markets are currently pricing in a near-certainty of a 25-basis-point cut later this month, per CME’s FedWatch tool.
(Reporting by Jaspreet Kalra; Editing by Janane Venkatraman)
