Rupee ends higher on foreign banks' dollar sales, positional adjustments

The currency outperformed most of its Asian peers, which stayed in tight ranges as concerns about the impact of U.S. President Donald Trump's trade policies lingered.

The Indian rupee rose on Thursday, aided by dollar sales from foreign banks and the trimming of short bets against it, over a trading session that was impacted by an outage on the London Stock Exchange Group's (LSEG) foreign exchange trading platform.

The rupee closed at 86.9975 against the U.S. dollar, up 0.2% on the day. The currency was down 0.1% week-on-week.

The currency outperformed most of its Asian peers, which stayed in tight ranges as concerns about the impact of U.S. President Donald Trump's trade policies lingered.

Dollar sales from foreign banks as well as traders' cutting of short positions helped the rupee, traders said.

In the near-term, if dollar weakness persists, the local currency "could move towards 86.50 but the move would be staggered as there is strong importers would be active below 87," a trader at a foreign bank said.

While trading volumes were impacted by an outage in LSEG's FX trading platform, the issues were resolved subsequently, traders said.

The dollar index was little changed at 103.6, supported by an uptick in U.S. bond yields, even though data on Wednesday showed consumer prices rose less than expected in February, indicating a higher probability of Federal Reserve rate cuts.

The bond market reaction to the inflation print "could mirror some reluctance to buy into the deflationary story before the tariff impact has started to show," ING Bank said in a note.

The bank expects the dollar to stabilise in the near-term with risks titled to the upside in the coming weeks.

Meanwhile, dollar-rupee forward premiums declined on Thursday, with the 1-year implied yield lower by 3 bps at 2.13%, pressured by a rise in near-tenor U.S. Treasury yields.

Investors now await the release of wholesale U.S. inflation data due later in the day. Indian financial markets are shut on Friday for a local holiday.