India rupee propped up by inflows, held back by importers

The Indian rupee rose on Friday, boosted by inflows and data that prompted economists to raise their growth forecasts for Asia's third-largest economy.

The rupee was at 83.3275 to the U.S. dollar at 10:54 a.m. IST, up from 83.3950 in the previous session. The local currency hit an intraday high of 83.2525, likely on dollar inflows.

USD/INR saw "sizeable" selling interest just before the usual open for spot, a FX trader said. "Suspect that is related to an inflow - the daily fix and the cash swap bears that out. After that, it is the usual dip buying (on USD/INR) kicking in." The daily fix was dealt at a discount of 0.25 paisa, indicated dollar selling interest at the reference rate. Banks usually receive orders from their clients to sell dollars at the fix rate, which they can then hedge in the interbank market.

Meanwhile, the USD/INR overnight swap rate, Friday over Monday, pushed higher.

Banks having a dollar inflow would typically sell dollars in spot and conduct sell/buy swaps if they wanted to adjust the transaction to settle today instead of on a spot basis which is today + two days. That would prompt a rise in the overnight swap rate.

The rupee was helped by data that showed that India's economy expanded at a faster clip than what economists had expected, prompting them to upwardly revise growth forecasts.

India's central bank "is likely to remain hawkish", Deutsche Bank said, considering the robust GDP print and upside risks to near-term inflation due to food price volatility.