Asian currencies dropped, led by the Malaysian ringgit’s 0.4 per cent decline and the Chinese yuan also weakened to a four-and-a-half-month low
The Indian rupee gained on Tuesday, ducking the weakness in its Asian rivals and instead finding support from exporters’ mild dollar sales and expectations of the central bank’s intervention.
The rupee was at 83.3625 against the U.S. dollar as of 4:35 am GMT, slightly stronger than its close of 83.40 on Thursday. The markets were shut on Friday and Monday.
The rupee is likely to be range-bound, with the Reserve Bank of India (RBI) “expected to keep a tab on rupee weakness by selling dollars,” according to Anil Bhansali, head of treasury at Finrex treasury advisors.
The dollar index was at 105.06, close to its highest since mid-November, after having increased more than 0.4 per cent on Monday due to stronger-than-expected U.S. ISM (Institute for Supply Management) manufacturing PMI data.
Asian currencies dropped, led by the Malaysian ringgit’s 0.4 per cent decline. The Chinese yuan also weakened to a four-and-a-half-month low, prompting the country’s state-run banks to sell dollars.
The dollar-rupee pair is likely to trade with a “buy on dips” bias and gains are likely to be limited near 83.40-42, according to a foreign exchange trader at a private bank.
Mild dollar sales by exporters also aided the rupee in early trading, the trader further said.
In the meantime, dollar-rupee forward premiums edged down, with the 1-year implied yield down 1 basis point at 1.62 per cent, pressured by an increase in U.S. bond yields as investors pared expectations of a Fed rate cut in June.
The 1-year U.S. treasury yield edged up to 5.09 per cent in Asia trading hours after having risen 5 basis points (bps) on Monday.
