The Indian rupee rose on Thursday on the back of dollar inflows, while forward premiums dipped as focus stayed on the Reserve Bank of India’s upcoming swap maturity.
The rupee was at 82.9175 to the U.S. dollar at 11:26 a.m. IST, up from 82.97 in the previous session. The currency has been in a 4 paisa range so far.
“There are plentiful inflows, though, from the price action, it would not seem like that,” a FX trader at a bank said.
“Obviously, what the RBI has been up to is responsible for the restrained price action.”
The central bank has been buying dollars in the last few days, with the intervention picking up late in the session, according to traders.
The rupee hit a three-week high of 82.86 on Wednesday, before slipping. It should “be expected that this (late RBI intervention) could happen again today”, the trader said. The dollar/rupee forward premiums dipped, with the 1-year implied yield falling to the lowest in two months.
The RBI’s upcoming $5 billion swap maturity was probably spurring the offered tone on premiums, a swap dealer said. The central bank’s sell/buy USD/INR swap matures on March 11.
Meanwhile, the rupee’s Asian peers were mostly higher while the dollar index dropped to 103.86. The dollar struggled despite a further decline in the odds of a Federal Reserve rate cut at the March or May meetings, following the minutes of the January policy meeting.
The minutes, which showed that the bulk of policymakers were concerned about the risks of cutting interest rates too soon, “emphasize risk of easing prematurely”, Goldman Sachs said in a note.
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This post first appeared on economictimes.indiatimes.com
