INDIAN RUPEE WEAKENS SLIGHTLY ON HIGH DOLLAR DEMAND, RBI INTERVENTION LIMITS FALL

Rupee Opens Marginally Lower

MUMBAI, January 17 – The Indian rupee weakened marginally on Friday, pressured by rising dollar demand due to the maturity of positions in the non-deliverable forward (NDF) market. However, potential intervention by the Reserve Bank of India (RBI) curbed further depreciation.

As of 9:55 AM IST, the rupee stood at 86.5850 per US dollar, slightly lower than the previous session’s close of 86.55.

RBI Intervention Provides Support

Traders noted that the rupee, which was listed at 86.63 in the interbank trading system before the domestic spot market opened, likely gained support from the RBI’s intervention, allowing it to begin the session almost flat.

A trader at a foreign bank said that increased dollar demand at the daily reference rate would likely exert pressure on the rupee until midday.

High Dollar Demand Weighs on Rupee

The reference rate, or daily fix, was last quoted at a 0.65/0.90 paisa premium, signaling robust dollar bids, according to traders.

Higher dollar demand from maturing NDF positions also meant that the rupee could not benefit from a weaker dollar and a decline in US Treasury yields.

The dollar index stood at 109 after falling for the fourth consecutive session on Thursday, while the 10-year US Treasury yield dropped by 5 basis points in the previous session to trade near 4.60% in early Asian trading.

Fed Signals Potential Rate Cuts

US Treasury yields declined after Federal Reserve Governor Christopher Waller indicated the possibility of three or four rate cuts this year if US economic data continues to weaken.

Fed officials’ median projections from December suggest two total rate cuts for 2025. Investors are now focusing on the inauguration of US President-elect Donald Trump on Monday and any immediate policy measures he might announce.

Outlook for the Rupee

Amit Pabari, managing director at forex advisory firm CR Forex, said the rupee is expected to trade “in a volatile range between 86.20 and 86.80” in the near term.

Reported by Jaspreet Kalra; Edited by Sonia Cheema