Rupee expected to open modestly stronger

The rupee slid to an all-time low of 90.4675 in the previous session

The Indian rupee is expected to open modestly stronger on Friday, supported by a weaker dollar, though traders warn the relief may be short-lived as persistent merchant and portfolio outflows keep pressure on the currency.

The 1-month non-deliverable forward indicated the rupee will open in the 90.27-90.30 range versus the U.S. dollar, after settling at 90.3675 on Thursday.

The rupee slid to an all-time low of 90.4675 in the previous session with traders pointing to heightened dollar demand on account of corporate payments and positional adjustments after its previous record low of 90.42 gave way.

Intervention by the Reserve Bank of India, though, helped the currency avert a steeper slide, traders said.

Weakness in portfolio flows has been a sore spot for the rupee. Foreign investors have net sold nearly $2.5 billion worth of Indian stocks and debt so far this month.

The rupee’s weakness is reflecting ongoing uncertainty over a potential trade deal with the U.S., MUFG said. The firm expects the currency to settle below 90 next year.

Indian Prime Minister Narendra Modi said he spoke with U.S. President Donald Trump by phone on Thursday, as New Delhi seeks relief from 50% U.S. tariffs. It was unclear if a trade deal could be hammered out before the end of the year, an official told Reuters on the condition of anonymity.

Elsewhere, the dollar lingered near a two-month low against other major rivals, while Asian currencies were trading mixed.

A less-hawkish-than-feared U.S. central bank outlook and the bank’s announcement of liquidity injections weighed on the dollar this week, putting it on course for its third straight weekly decline. The rupee, meanwhile, is on track to end the week down by around 0.5%.