MUMBAI: The Indian rupee ended marginally lower against the U.S. dollar on Friday, while the central bank’s likely intervention helped the currency end almost flat for the week and sent forward premiums to a one-month high.
The rupee dipped to 82.8575 per dollar from 82.7625 in the previous session. Last Friday, the rupee was at 82.87.
The USD/INR 1-year implied yield rose about 20 basis points this week, to 2.20%. The 1-year forward premium rose to 1.82 rupees, up 17 paisa from last week.
The Reserve Bank of India was likely responsible for the rupee’s narrow range and the rise in premiums, according to traders.
The RBI, through public sector banks, was suspected of selling dollars to keep the rupee above 83 per dollar and of conducting sell/buy swaps in the forwards market.
The RBI usually sells dollars in spot and does buy/sell swaps, but it looks like the objective right now is to make sure the rupee does not depreciate further and that premiums rise, a trader at a Mumbai-based bank said.
Indian rupee may open slightly lower, risks falling below key support
The rupee was not impacted by the mounting risk aversion globally due to the hawkish outlook of major central banks. The Bank of Japan unexpectedly lifted its cap on 10-year bond yield this week.
U.S. equities are poised for a third straight week of declines while India’s BSE Sensex has slid 2.4% this week, its worst performance in six months.
“The steep correction (in Indian shares) has not led to more weakness in the rupee,” said Jayaram Krishnamurthy, head of research and advisory at Almus Risk Consulting.
“We expect the rupee to hold to its current range between 82.40 and 83.00, with the boundaries being well protected by the state-run banks’ actions.”
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