MUMBAI: The Indian rupee weakened slightly in early trading on Wednesday, pressured by dollar bids on behalf of importers amid lacklustre trading to kick off 2025, while dollar-rupee far forward premiums retreated from an over one-and-a-half-year high.
The rupee was at 85.6725 against the U.S. dollar as of 09:50 a.m. IST, down from its close of 85.6150 in the previous session.
The local currency has faced persistent downward pressure over the last few weeks on the back of multiple headwinds ranging from persistent strength in the U.S. dollar to concerns about India’s slowing economic growth.
The rupee declined for the seventh consecutive year in 2024, with bankers and analysts expecting the depreciation pressure to linger in early 2025.
The dollar index rose nearly 0.4% on Tuesday to 108.4, close to an over two-year high, while U.S. bond yields rose in holiday-thinned trading. The 10-year U.S. Treasury yield nudged higher by 3 basis points to 4.57%.
Indian rupee expected to round off difficult month on a muted note
Amid the lingering downward bias on the local currency, importers should “buy all dips (on USD/INR),” said Ani Bhansali, head of treasury at Finrex Treasury Advisors.
Bhansali expects the rupee to trade between 85.40 and 85.70 on the day.
Meanwhile, dollar-rupee forward premiums retreated, with the 1-year implied yield down 4 bps at 2.50% after touching their highest level since April 2023 in the previous session.
An “unusual surge” in very near-dated dollar-rupee swap rates had boosted forward premiums, which is cooling off now, a trader at a state-run bank said.
Trading activity is also “relatively muted given the start of the new year, the trader added.
Most regional markets were closed for the New Year holiday, while price action on India’s equity benchmark indexes were also muted.
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