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INDIA RUPEE - Rupee finishes month and quarter slightly lower than most Asian counterparts

The Indian rupee fell on Monday, ending the month and the quarter slightly lower. It trailed most Asian counterparts amid muted portfolio flows and was weighed down due to the country's deficit in external investments.

The dollar closed the day at 85.7550 against the currency, down by 0.3%.

In the face of a general dollar decline, most Asian currencies have suffered modest losses.

The Indian rupee has not changed much in the past year, but Asian currencies such as the Taiwan Dollar and Korean won, which are closely monitored by the rupee, have increased about 13% and 8 % respectively. Meanwhile, the offshore Chinese Yuan, another closely-tracked currency, is up more than 2%. Analysts cite India's deficit in external investment as one of the main reasons for the rupee's poor performance.

Investors are hedging against the persistent weakness of the dollar and boosting currencies in countries like Korea and Taiwan that have large investment surpluses.

The dollar index has fallen over 10% in the first half of the year, weighed down by concerns over U.S. fiscal and trade policies, fears over the future independence and expectations for a reduction of benchmark interest rates.

The rupee has also suffered from a sluggish portfolio flow, with foreign investors pulling a net of about $0.5 billion out of local bonds and stocks over the quarter April-June.

Analysts expect the rupee to be supported by a weaker dollar despite the relative underperformance.

DBS stated in a report that "we see scope for USD/INR consolidating in an 84 to 86 range with a downward bias." It added that it might lower its USD/INR forecast if US Federal Reserve pivots toward a rate reduction later this year, setting the stage for further USD weakness.

On that day, traders reported that dollar bids by foreign banks and state-run bank weighed down on the rupee despite the fact most Asian counterparts posted gains.

(source: Reuters)