Rupee weakens on year-end dollar demand from importers

By Jaspreet Kalra

MUMBAI (Reuters) – The Indian rupee fell on Thursday, weighed down by year-end dollar demand from importers and risk aversion spurred by a sharp halt in global equity rallies.

The rupee was at 83.25 against the U.S. dollar as 10:50 a.m. IST, down 0.1% from its previous close of 83.17.

Dollar demand from importers is likely to stay buoyant heading into year-end, a foreign exchange trader at a state-run bank said.

“Mostly people square their positions at this time, hence dollar demand will be there,” the trader added.

The dollar index dipped slightly to 102.3 after climbing nearly 0.3% overnight on Wednesday, while broader Asian currencies were mostly subdued.

The 10-year U.S. Treasury yield fell to its lowest level since July overnight in New York and was last quoted at 3.86%. The 2-year yield also slipped 7 bps to 4.36% and was little changed in Asia hours.

The rupee was also pressured by risk aversion as equity rallies spurred by expectations of the Federal Reserve’s rate cuts in 2024 faded, with the S&P 500 Index logging its worst session in nearly three months on Wednesday.

Domestic benchmark equity indices Nifty 50 and BSE Sensex were down slightly on Thursday as well.

The rupee will persist in its narrow range with downside likely capped near 83.35 in the near-term, said Gaurang Somaiya, a forex and rates researcher at Motilal Oswal Securities.

Investors will also keep a keen eye on statements from Fed officials as they have both signalled and pushed back on rate cut expectations since Friday, Somaiya added.

Philadelphia Federal Reserve President Patrick Harker said on Wednesday that while it’s important that the Fed starts to lower rates, they “don’t have to do it too fast (and) we’re not going to do it right away.”

(Reporting by Jaspreet Kalra; Editing by Varun H K)