MUMBAI: The Indian rupee fell slightly on Tuesday after the US dollar recouped a small part of its recent losses, while far forward premiums dropped amid the soft overnight swap rate.

The rupee was at 83.2525 to the dollar at 10:40 a.m. IST, down from 83.2150 in the previous session.

The Korean won, the Malaysian ringgit and the Indonesian rupiah were down 0.4% to 0.7%, halting a rally prompted on bets that the US Federal Reserve rate hike cycle is done.

The dollar index inched up to 105.36, having dropped to over a month’s low on Monday, and the 10-year US Treasury yield was at 4.64%, about seven basis points higher than Monday’s low.

“USD/INR remains within a narrow range, fluctuating between 83.00/83.10 and 83.30,” Anindya Banerjee, head research - FX and interest rates at Kotak Securities, said.

“Intraday traders may consider buying on price dips, setting stop-loss orders below the 83.00 level.”

While the dollar was doing well against its major peers and Asian currencies on Tuesday, a benign US jobs report and weak manufacturing and services data has dented the outlook for the US currency. Several Fed policymakers are lined up to speak this week, including Fed Chair Jerome Powell on Wednesday and Thursday.

Indian rupee ends lower on persistent dollar demand

“Expect the many Fed officials speaking this week to… push the case for rates to stay high through 2024 on a soft landing in the US economy,” DBS said in a note.

Meanwhile, rupee far forward premiums inched lower with the 1-year implied yield falling to 1.62%, down 2 basis points from Monday.

The low overnight USD/INR swap rate is keeping near forward premiums offered and far forwards depressed, traders said.

The USD/INR cash swap rate was at 0.13 paisa, an implied rupee rate of 5.90% compared with the 6.80% call rate.