On March 17, the Indian rupee showed signs of resilience, gaining strength thanks to dollar sales initiated by foreign banks. As concerns about a potential slowdown in the United States economy loomed, the dollar hovered near a five-month low against several major currencies. Early trading saw the rupee peak at 86.8075, marking its highest point since February 24, although it slightly retreated to 86.8450 by mid-morning, representing a nearly 0.2% increase for the day.

Factors Influencing the Rupee’s Strength

• Dollar Sales from Foreign Banks: During the initial trading hours, foreign banks actively sold dollars, which provided a boost to the rupee. A trader from a state-run bank noted this trend, stating, "We’ve observed a consistent pattern of foreign banks offering dollars early in the session, while the opposite occurs in the afternoon."

• Overall Dollar Weakness: The general decline in the dollar’s value has given the rupee some room to breathe, contributing to a 0.6% increase in the local currency throughout March, despite ongoing foreign selling of Indian equities.

Bank of America’s Insights

According to a recent note from Bank of America, there’s a growing recommendation for investors to take long positions on high-yielding currencies, including the Indian rupee. The bank highlighted that the rupee stands to gain from:

• A softer dollar environment.
• Decreasing oil prices.
• Positive carry flows.
• A seasonally favorable current account.

Upcoming Trade Data

Market participants are also bracing for India’s trade report expected later today, with forecasts suggesting that the merchandise trade deficit could narrow to $21.65 billion for February, based on a recent Reuters poll.

Chinese Yuan Outlook

While the rupee shows positive momentum, the outlook for the offshore Chinese yuan appears less favorable. Bank of America predicts that the yuan may underperform its counterparts, as the country’s central bank is likely to intervene against any appreciation to maintain loose monetary conditions.

In summary, with favorable market dynamics and strategic actions from foreign banks, the Indian rupee is navigating through a complex economic landscape, aiming for stability amidst external pressures.