Market News

By Dharamraj Dhutia and Nimesh Vora

MUMBAI (Reuters) - The Indian rupee inched higher on Thursday as persistent dollar selling by foreign banks over the last few days that supported the currency and puzzled traders.

The rupee was at 86.9750 to the U.S. dollar at 11:05 a.m. IST, up from 87.0650 on Wednesday.

Foreign banks were on the offer in dollar/rupee again, extending the pattern seen over the past two sessions, traders said.

The persistence of these flows has confounded markets regarding their origin, with many doubting they were exporter-related.

One banker noted that portfolio inflows into equities and debt have been tepid, suggesting flows from custodian clients were unlikely.

While the market was expecting the rupee to be rangebound, dealers said position adjustments or one-off large trades were the more probable drivers.

That the rupee "is managing to hold up despite Jackson Hole event and the U.S. tariff overhang is surely surprising to many," said a currency trader at a Mumbai-based bank.

U.S. Federal Reserve Chair Powell is set to speak on Friday at the Jackson Hole symposium where his remarks will be closely watched. His previous remarks at the meeting had previously shifted market expectations.

Meanwhile, the August 27 deadline on which the additional 25% U.S. tariffs on Indian goods is implemented looms. If implemented, it would pose a fresh negative for the rupee.

The currency last week had remained largely weak, making a low of 87.73.

After giving good opportunity to exporters in the last week it is the turn of importers who are getting an opportunity to hedge their near-term payables, Anil Kumar Bhansali, head of treasury at Finrex Treasury Advisors, said.

(Reporting by Dharamraj Dhutia and Nimesh Vora; Editing by Harikrishnan Nair)