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MUMBAI: The Indian rupee closed lower on Tuesday, weighed by broad strength in the U.S. dollar and associated weakness in the Chinese yuan.

The rupee fell to 82.71 versus the dollar, compared to 82.6250 on Monday. It dropped to as low as 82.7850 during the session.

The Chinese yuan continued to decline, falling past the 7.10-level for the first time since November last year, on worries over China’s economic recovery and a hawkish outlook from the U.S. Federal Reserve.

Yuan’s weakness and some possible buying from government companies is supporting the USD/INR, a trader with a public sector bank said.

The rupee is down about 1.1% so far this month, potentially headed for its worst performance since December 2022. The dollar index, meanwhile, has gained about 2.5% in May.

The USD/INR is finding some sellers around 82.75-levels on fears of possible intervention by the Reserve Bank of India (RBI) if the rupee weakens further, said Anil Bhansali, head of treasury at Finrex Treasury Advisors.

Indian rupee ends lower, forward premiums tumble

The RBI had likely intervened, helping limit the rupees losses, recent forex data indicated.

Some of the foreign inflows into equities have also helped in cushioning the rupee’s fall, analysts said. Foreign investors have poured in about $5 billion into Indian equities this month.

Meanwhile, the 1-year rupee forward premium was little changed at 1.77%, hovering near its lowest level this year. The jump in U.S. yields on expectations that the Fed will likely raise rates further has prompted a near-50 basis points fall in the 1-year implied yield.

Investors will now focus on the U.S. jobs data due on Friday and the country’s inflation numbers, ahead of the Fed meeting on June 13-14.

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