MUMBAI: The Indian rupee declined slightly on Friday on US dollar demand from importers, both in cash and forward markets, while forward premiums rose.
The rupee was at 83.2725 to the dollar at 11:10 a.m. IST, compared with 83.2325 on Thursday.
“This is just the usual dollar demand we keep seeing on all days.
Importers are making the daily payments and hedging a part of their near payments,“ a forex trader at a bank said.
“We have seen this a lot (in recent days)… good amount of dollar demand from various sources.” The rupee this week has been mostly unable to take advantage of the fall in US Treasury yields, the rally on Asian peers and the drop in oil prices.
The Indian currency is up only 0.1% this week compared with 1.2% to 2% rally for the Korean won, the Indonesian rupiah and the Thai baht.
US bond yields have dropped on expectations that slowing inflation and growth will push the Federal Reserve to cut interest rates around the middle of next year.
Investors are pricing in total rate cuts of 100 basis points in 2024, beginning from May. This has bought relief to Asian currencies and has boosted risk appetite.
The S&P 500 Index is at its highest in one-and-a-half months.
Data out on Thursday reinforced expectations the US labor market was softening. US initial jobless claims rose to a 3-month high. Further, industrial production in the world’s largest economy contracted more than expected.
Indian rupee to rally on growing bets Fed to cut rates next year
The data “further highlighted the economic risks” amid a tight monetary policy, Yeap Jun Rong, market strategist at IG Asia, said. Meanwhile, rupee forward premiums inched up with the 1-year implied yield rising to 1.58%.
Forward premiums have been pressed higher by the rise in US yields, but so far the upside has been muted.
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