The unit was also among the worst-performing Asian emerging market currencies over the period, with only the Thai baht weakening further, at around 0.5%. "Increasing foreign fund outflows and the withdrawal of Adani Enterprises' $2.5 billion follow-on public offer (on Wednesday) dampened market sentiment, weakening the rupee against the dollar," said Ritesh Bhansali, vice president at Mecklai Financial Services.
Foreign investors sold about $374 million worth of Indian
equities on Thursday, according to preliminary data. That is on
top of the $3.5 billion worth of withdrawals in January.
Indian shares rallied 1.2% on Friday to claw back
weekly declines, with Adani Enterprises ending higher
after falling over 30% during the session.
Meanwhile, the Reserve Bank of India's (RBI) likely absence
in the forward market in the wake of the rupee's decline has
halted the uptrend in forward premiums, analysts said.
The 1-year USD/INR forward implied yield declined up to 2.22% on Friday, adding to the 10-basis-point
(bps) fall in the previous session.
Meanwhile, the dollar index started to give back some
of its overnight gains ahead of the latest U.S. employment data,
which may shift Federal Reserve policy on the number of rate
hikes planned this year. The Fed already hiked rates by a
smaller 25 bps this Wednesday.
Investors now look to the RBI monetary policy committee
meeting decision on Feb. 8, with a 25 bps increase widely
expected.
(Reporting by Anushka Trivedi; Editing by Janane Venkatraman)
