By Nimesh Vora
MUMBAI, – The Indian rupee inched lower on Friday, weighed by routine dollar demand from importers, while forward premiums fell after the Reserve Bank of India moved to provide banks with more flexibility in converting overseas inflows.
The rupee was quoting at 95.5625 to the dollar, having settled at 95.54 on Thursday. After opening at 95.51, the currency has so far traded in a narrow range of around 6 paisa, extending the rangebound pattern seen in recent days.
Traders said there was no specific trigger behind the dollar demand post the open, with regular month-end payments by importers adding to what they described as a persistent underlying bid for the U.S. currency.
With the rupee largely stuck in its recent range, trading has increasingly become about capturing 10-15 paisa intraday moves rather than taking large directional positions, a currency trader at a private sector bank said.
Asian currencies traded mixed and the dollar showed no decisive direction in the lead up to Federal Reserve Chair Kevin Warsh’s speech at Jackson Hole later on Friday.
Markets are looking for Warsh to explain his views on persistent inflation, the Fed’s policy framework for responding to it, and whether he will offer reassurance amid recent bond-market volatility. Warsh’s reluctance to provide forward guidance has itself become a source of market uncertainty.
While the rupee’s near-term direction may hinge on his remarks, the broader bias for the currency remains towards depreciation, likely drifting toward 96.20-96.50 per dollar over the coming weeks, said Amit Pabari, managing director at Mumbai-based CR Forex.
Forward premiums, meanwhile, fell. Bankers said the RBI’s decision to give lenders greater flexibility in accessing its swap facility for FCNR(B)-related dollar inflows should prevent excess dollar liquidity from remaining in the banking system for an extended period.
That, in turn, has helped bring down near-term swap costs and forward premiums.
(Reporting by Nimesh Vora; Editing by Eileen Soreng and Ronojoy Mazumdar)
