Rupee Upside Capped By Corporate Outflows, Fed Stance: Report

The rupee's gains against the US currency on Wednesday are likely to be stalled by dollar outflows by corporates and the US Federal Reserve's hawkish outlook, some analysts said.

The rupee was trading at 79.4250 per US dollar by 0638 GMT, up from 79.6550 on Friday. The local currency had opened at 79.27.

"The fall in oil prices and risk on sentiment has helped the rupee to appreciate. However, there are corporate outflows lined up of over a billion dollars that will create demand for the dollar in the system," said Anindya Banerjee, head of research for forex and interest rates at Kotak Securities.

Mr Banerjee pointed to KKR and Co. Inc. selling its entire stake in Max Healthcare Institute Ltd for around 94 billion rupees ($1.18 billion).

Global forex cues, meanwhile, are supporting dollar, with Europe and China continuing to release poor economic data, Mr Banerjee said. China on Monday reported weak economic activity and spending data, prompting the country's central bank to cut key lending rates.

Earlier this week, the offshore Chinese yuan weakened below 6.80 to the dollar for the first time since May.

Traders are awaiting the minutes of the US Federal Reserve's July meeting, due later Wednesday. Fed officials, following the softer-than-expected US inflation data, have pushed back against talks of rates nearing the peaking.

"The minutes to the July meeting should show Fed officials are open to a 50 basis points or a 75 basis points hike at the September meeting, depending on the data," Tom Kenny, senior economist at ANZ Research, said in a note.

"We also expect discussions to reveal the higher-for-longer viewpoint for the policy rate."

It is difficult to be bullish on the rupee ahead of the Fed minutes, said Arnob Biswas, head of research at SMC Global Securities.