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Wednesday, December 7, 2022

INDIAN RUPEE Rupee weakens on corporate demand for dollars; premiums fall

MUMBAI, Nov 23 (Reuters) – The Indian rupee fell slightly against the US currency on Wednesday amid dollar cash outflows from a major company, traders said, while premiums in the local currency eased.

The rupee last traded at 81.8450 per US dollar, compared with Tuesday’s close of 81.6650. The local unit was in a tight range of 81.75 to 81.8550 during the session.

Dollar cash outflows by a large company kept the USD/INR pair bid, a trader said. For a cash outflow in dollars, a company would have to buy dollars on spot and enter into a cash buy/sell swap on spot.

It was the third session of muted intraday moves in the rupee. Compared to last week’s volatility, the rupee has so far traded in a range close to 30 paisa this week. The 1-month USD/INR implied volatility has fallen to around 5.5%.

Rupee premiums fell, and the 1-year implied yield fell to 2.10%, near its lowest level in more than a decade. The 1-year implied is down about 30 basis points so far this month.

The focus will be on the US Federal Reserve’s November meeting minutes to be released later that day. Investors are debating the likely path for US rates after the Fed at that meeting signaled a slower pace of rate hikes. The minutes are likely to provide more clues.

The dollar index inched above 107, ahead of the minutes. Expiring Treasury yields and US stock futures were slightly higher.

Reporting by Nimesh Vora; Edited by Dhanya Ann Thoppil

Our standards: Thomson Reuters Trust Principles.

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