By Jaspreet Kalra
MUMBAI – The Indian rupee weakened slightly on Tuesday, tracking a decline in its Asian peers, but its losses were limited by mild dollar sales by state-run banks, traders said.
The rupee was at 83.9325 as of 10:10 a.m. IST, against a close of 83.90 in the previous session.
Month-end dollar bids from importers weighed on the rupee in early trading, but state-run banks were present on offer, blunting the impact, a trader at a foreign bank said.
While current levels are “their (Reserve Bank of India’s) zone” to offer dollars, state-run banks didn’t appear to be acting on the central bank’s behalf on Tuesday, the trader said.
The RBI has routinely intervened this month to ensure that the rupee doesn’t fall below the 84 handle. The currency had touched its record low of 83.9725 on Aug. 7.
The dollar index was little changed at 100.8 while Asian currencies were down between 0.1% and 0.4%.
The rupee is expected to “trade in a 83.80-83.95 range intraday with sideways price action,” FX advisory firm IFA Global said in a note.
Meanwhile, dollar-rupee forward premiums slipped from multi-month highs hit in the previous session, pressured by an uptick in U.S. bond yields.
The 1-year implied yield was down 2 basis points (bps) at 2.10%. The 1-year Treasury yield rose 5 bps to 4.46% in Asia trading.
With Federal Reserve Chair Jerome Powell having signalled that the U.S. central bank will begin to cut rates next month, investors are focussed on whether it will deliver a 25 bps or a 50 bps cut.
Investors have currently priced in nearly 100 bps of rate cuts over the Fed’s next three meetings in 2024, meaning they expect a 50 bps cut at one of the meetings.
(Reporting by Jaspreet Kalra; Editing by Mrigank Dhaniwala)
