Key points:
- The Indian rupee gains slightly, following strength in Asian currencies.
- Dollar-rupee forward premiums rise to a near six-month high.
The rupee (USDINR) stood at 83.70 against the U.S. dollar as of 11:00 a.m. IST, up from its previous close of 83.72. On Wednesday, the currency had hit a record low of 83.7450. Asian currencies rose between 0.1% and 0.8%, while the dollar index (DXY) was at 104 after declining 0.4% on Wednesday.
Picture: Rupee on the rise, trading at 83.808 on the VT Markets app.
Local oil companies also sought dollars, and the general market bias remained towards mild depreciation. This suggests the rupee is unlikely to rise above 83.60 without large inflows.
Meanwhile, dollar-rupee forward premiums rose, with the 1-year implied up 3 basis points to 1.88%, nearing a six-month high. This rise was aided by the decline in U.S. Treasury yields.
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RBI stabilises USD/INR with active dollar interventions
The Reserve Bank of India’s active buying and selling of dollars have kept the USD/INR movements relatively stable. The RBI’s recent interventions have prevented sharp depreciation of the rupee and absorbed dollar inflows, limiting the rupee’s gains.
India’s foreign exchange reserves rose for the third straight week, reaching a lifetime high of $670.86 billion as of July 19. This increase in reserves provides a buffer against external shocks and supports the rupee.
Traders await U.S. jobless claims and July jobs report
Traderes are now awaiting the U.S. jobless claims data due later in the day, followed by the closely watched jobs report for July, due on Friday. These reports will offer further insights into the U.S. economy and could influence future rate cut expectations.
The rupee’s performance will likely depend on the balance between dollar inflows and RBI interventions. While forward premiums suggest some support for the currency, ongoing import demand for dollars and external economic factors will continue to play a crucial role.
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