RUPEE RISES ON DOLLAR INFLOWS
The Indian rupee experienced an uptick on Thursday, supported by dollar inflows, while forward premiums declined, with attention focused on the Reserve Bank of India’s forthcoming swap maturity.
Numeric Detail: The rupee (USDINR) stood at 82.9175 against the U.S. dollar at 11:26 a.m. IST, marking an increase from the previous session’s rate of 82.97. The currency has remained within a 4 paisa range thus far.
Dollar Inflows and Market Sentiment: Despite plentiful inflows, market observers note restrained price action, attributing it to the Reserve Bank of India’s recent interventions in the forex market.
RBI Intervention: The central bank has been actively buying dollars in recent days, with increased intervention observed late in the session.
Anticipation of Further RBI Intervention: Traders anticipate the possibility of late RBI intervention again on Thursday, particularly considering the rupee’s recent performance, which saw it reach a three-week high before retreating.
Decline in Forward Premiums: Forward premiums for dollar/rupee dipped, with the 1-year implied yield dropping to its lowest level in two months.
Impact of RBI’s Swap Maturity: The offered tone on premiums is likely influenced by the Reserve Bank of India’s upcoming $5 billion swap maturity, scheduled for March 11.
Global Market Context: While the rupee’s Asian counterparts mostly gained ground, the dollar index dropped to 103.86. The dollar’s struggles persist despite diminishing expectations of a Federal Reserve rate cut at the March or May meetings, as revealed in the minutes of the January policy meeting.
Key Takeaways:
- The rupee strengthens on the back of dollar inflows, despite restrained price action attributed to RBI interventions.
- Forward premiums for dollar/rupee decline, potentially influenced by anticipation of RBI’s swap maturity.
- Market sentiment remains cautious amid global developments, including the dollar’s struggles and Federal Reserve rate cut expectations.