Rupee ends lower, but posts best week in four on dollar sell-off

The Indian rupee ended slightly lower on Friday, but logged its best week in four, helped by a sell-off in the dollar on expectations the U.S. Federal Reserve's rate hike cycle was near its end.

The rupee ended at 82.1615 against the dollar, after closing at 82.0725 on Thursday, snapping four sessions of gains. For the week, however, the currency rose 0.5%.

The dollar index, which measures the U.S. currency against six major rivals, fell to a fresh 15-month low on Friday and is down 2.4% so far this week, after a data showed that inflation was easing in the U.S.

Though the dollar index has plunged below 100, the reaction in rupee is limited as there is a sense of fear that if the greenback reverses, then the rupee might go back to 82.40-82.50 levels, said Arnob Biswas, FX research head at SMC Global.

"This is the reason why importers are jumping to hedge their exposures," Biswas said.

Meanwhile, rupee forward premiums rose, with the one-year implied yield jumping to an over two-week high of 1.76% intraday, tracking fall in U.S. treasury yields.

The yield is up 23 basis points from its year-to-date low of 1.53% hit last week.

Traders and analysts also said the 81.90-level was acting as a major resistance for the rupee, and importers were active around the level to purchase dollars.

Traders expect the local currency to mostly follow the dollar moves next week.

"It's hard to find a clear counterargument against the bearish dollar momentum, but the move is looking stretched," ING analysts said in a note.