Rupee dips, premiums plunge to 11-year low

On Thursday, the dip in Asian peers helped the Indian rupee weaken versus the dollar while the current decline in forward premiums continued.

In the most recent trading session, the rupee was down from 81.2975 to 81.65 per US dollar. The dollar index and the Chinese yuan both had a significant impact on the local unit’s oscillations, which ranged from 81.46 to 81.67.

The offshore yuan was poised for its third straight day of losses as the dollar index edged up to 106.34. The dollar’s demand was bolstered on Wednesday by U.S. retail sales figures that were stronger than anticipated.

The statistics, to some extent, suggested that the U.S. Federal Reserve would likely maintain higher rates for longer in addition to continuing to raise the policy rate.

Another decline in forward premiums, which lower the cost of purchasing dollars for a future date, did not strengthen the rupee.

The 1-year USD/INR forward implied yield dropped as low as 2.10% at one time, its lowest level since 2011. The near-30 basis point decline was attributed by traders to the unwinding of arbitrage trades and a decline in demand for cash dollars.

Near-forward premiums decreased as a result of the reduction in the cash USD/INR exchange rate to about 0.40 paisa.

Now, three of the last four sessions have seen a decline in the rupee. Its 2% gain from last week, which was supported by lower-than-expected U.S. inflation figures, has almost entirely been given up.