Rupee dips, but remains in favour with most interbank traders

By Nimesh Vora

MUMBAI (Reuters) – The Indian rupee declined on Tuesday, bogged down by the dollar’s rally on the back of higher U.S. Treasury yields and tepid risk.

The rupee was at 82.9750 to the U.S. dollar at 11:02 a.m. IST, down from 82.88 in the previous session. The domestic currency’s decline was smaller than other Asian currencies.

The rupee’s drop in step with Asia “will lack much follow through”, a spot foreign exchange trader at a private bank said. He does not expect the currency to weaken much beyond 83.

An fx head at a public sector bank said that while there has been “a decent recovery (on USD/INR)” from Monday’s low, it does not “bring into question” the last two week’s downtrend.

Brokerage Motilal Oswal said the USD/INR is seen trading with a “sideways-to-lower” bias, pegging resistance at around the current level.

The offshore Chinese yuan dropped to 7.1950 to the dollar, the lowest in more than a month, while the Korean won fell 0.8% to the lowest since the first week of November.

Asian currencies fretted about the pushback by two European Central Bank policymakers on rate cuts, pushing yields in Europe and the United States higher. The two-year U.S. yield rose six basis points in Asia to 4.20%.

Federal Reserve Board Governor Christopher Waller’s speech later in the day will be scrutinised for cues on when the U.S. central bank is likely to begin cutting rates and how many interest rates cuts will be delivered this year.

Waller’s comments are seen as very important in the context that he had flagged off the Fed pivot in his late-November speech.

That was followed by policymakers at the December meeting projecting three interest rate cuts in 2024.

(Reporting by Nimesh Vora; Editing by Sohini Goswami)