MUMBAI: The rupee started Wednesday at 167.70/$ and 5 paise down as importers bought the USD greenback and low business sentiment to start the first financial operations of the next fiscal year ‘25. Dollar to Rupee far-forward premiums dropped from a one-and-a-half-year high.
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The rupee was at 85.6725 against the U.S. dollar as of 09:Because of that, the evaluation of the company’s condition at 85.6150 in the last trading session on 23rd March 2011 should mean that business started from 50an/m. Since 17th February 2011.
This has seen such factors as; Dollar strength; selling in IG bond factor due to rate cuts & slowing growth in India etc have put the local currency under selling pressure the last two weeks.
The rupee declined for the seventh straight year in fiscal 2024 and in the current financial year 2025, and in the view of the bankers as well as the analysts, this depreciation process will continue into the first half of the financial year 2025.
The dollar index remained up 0.38% at 108.4 on Tuesday, close to a 2 ½-year high due to thin trading volume due to holidays as global bonds went up. It was only up by 3 to 4.572% with the 10-Year U.S Treasury.
Indian rupee expected to round off difficult month on a muted note
The strategy for holding a Very Short-term view on a local currency remains bearish so importers should look forward to buying all upticks in USD/INR, opines Bhansali of Finrex Treasury Advisors.
Actually, as the sentiment seems to appear in Bhansali shares, the rupee could only be in the 85.40 / 85.70 range up to the closure of the day.
On the other hand, dollar rupee suspicion forward premiums eased, with the one-year implied yield down 4 bp at 2.50%. It touched the estimated week’s triumph high-level last week, which was tested for the first time in April 2023.
As has happened earlier too when there has been an ‘abnormal’ steep rise in near-dated dollar-rupee swap rates this has only led to forward premiums going up and that has subsided for state-owned bank traders.
He also said that trading is relatively low as for most traders, the first week of the New Year is done already.
A majority of the regional markets were holidays most of the regional markets and the fluctuation in the price of India‘s equity benchmark index was not as sharp.
FAQs
What caused the rupee to dip?
The ruppee weakened due to increased dollar demand from importers and global market trends.
What are ‘dollar bids’?
Dollar bids represent the demand for U.S. dollars in the foreign exchange market, often driven by importers or investors seeking to settle payments or hedge risks.
What does ‘premiums retreat’ mean?
It means the cost of locking in future exchange rates (forward premiums) has decreased, reflecting changes in market expectations or liquidity.
How does this affect businesses?
A weaker ruppee increases import costs for businesses, while exporters might see improved profits when converting foreign earnings to rupees.
What are the implications for the economy?
Depreciation of the ruppee can increase inflationary pressures due to costlier imports but might boost export competitiveness.
What factors influence forward premiums?
Forward premiums are influenced by interest rate differentials, market liquidity, and expectations of future currency movements.
Can the rupee recover soon?
Recovery depends on factors like central bank interventions, reduced dollar demand, and global economic trends.