MUMBAI, Oct 15 (Reuters) – The Indian rupee ended little changed on Tuesday as the slump in crude oil prices offset the impact of weakness in Asian peers and dollar demand from foreign banks.
The rupee closed at 84.0375 to the U.S. dollar against its close at 84.06 in the previous session. The currency had slipped to an all-time low of 84.0750 on Monday.
Mild dollar sales from state-run banks alongside limited speculative appetite kept losses for the rupee at bay, traders said.
It is “quite likely that it (USD/INR) drifts up to 84.20 in the near-term but a rise above that could create some panic among importers so the Reserve Bank of India is unlikely to allow that”, a trader at a state-run bank said.
Asian currencies were down between 0.1% to 0.7% on the day while the dollar index was at 103.1, within touching distance of its two-month high hit on Monday.
“Declining oil prices suggest the scope for further USD gains today is tight … should we see more independent dollar outperformance, we could conclude that is due to some positioning ahead of the U.S. election in three weeks from now,” ING Bank said in a note.
While falling oil prices are a comfort for the rupee, portfolio investment flows are likely to be a more important driver for the currency in the near term.
Foreign investors have pulled out about $8 billion from local stocks this month, a sharp reversal from inflows of about $11.1 billion in September.
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Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala
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