The dollar index was down 0.1% at 104.2 after inflation data released on Friday cemented hopes that the Federal Reserve will begin to cut policy rates from September. Asian currencies were mostly higher by 0.1% to 0.8%.
The rupee is likely to be find support between 83.73-83.75, with market participants not too keen to test weaker levels on expectations the Reserve Bank of India will intervene to limit sharp declines, a foreign exchange trader at a mid-sized foreign bank said.
“State-run banks sold dollars close to the opening of the (local spot) session but don’t appear to be very active now,” the trader said.
The rupee hovered near all-time lows for much of last week pressured by outflows from local equities, volatility in the Chinese yuan and tepid risk sentiment.
On Monday, dollar-rupee rupee forward premiums jumped with the 1-year implied yield up 4 basis points at 1.72%, its highest level since February, aided by the decline in U.S. bond yields.
Forward premiums “have been creeping higher and are likely to continue to do so”, FX advisory firm IFA Global said in a note. The 1-year implied yield is up 18 basis points in July.
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