On Tuesday, the Indian rupee experienced a slight decline, mirroring the downturn in other Asian currencies, though its losses were mitigated by modest dollar sales from state-run banks, according to traders. By 10:10 AM IST, the rupee stood at 83.9325 (Dh22.8698), compared to its previous close at 83.90 (Dh22.8610). Early trading saw the rupee affected by month-end dollar bids from importers, but the presence of state-run banks offering dollars helped to soften the impact, as noted by a trader at a foreign bank. The trader also mentioned that although current levels are within the Reserve Bank of India's (RBI) range for dollar offerings, state-run banks did not seem to be acting on behalf of the central bank on Tuesday. The RBI has been actively intervening this month to prevent the rupee from dropping below the 84 mark, with the currency reaching its historical low of 83.9725 (Dh22.8807) on August 7. The dollar index remained stable at 100.8, while Asian currencies saw declines ranging from 0.1% to 0.4%. IFA Global, an FX advisory firm, predicted that the rupee would likely trade within a 83.80-83.95 range intraday, exhibiting sideways movement.
Meanwhile, dollar-rupee forward premiums decreased from the multi-month highs observed in the previous session, influenced by a rise in US bond yields. The 1-year implied yield dropped by 2 basis points (bps) to 2.10%, while the 1-year Treasury yield increased by 5 bps to 4.46% in Asian trading. With Federal Reserve Chair Jerome Powell indicating that the US central bank will start reducing rates next month, investors are closely watching whether the cut will be 25 bps or 50 bps. Currently, investors have factored in nearly 100 bps of rate cuts across the Fed's next three meetings in 2024, implying an expectation of a 50 bps cut at one of these meetings.
