Rupee Weakens on Dollar Demand

27 Nov 2024 , 02:30 PM

Due to importers’ dollar bids for month-end payments and public sector banks’ high demand for the US dollar, which was mostly tied to the monthly expiry of currency options, the Indian rupee declined on Wednesday, according to news reports.

The rupee was down 0.1% from its closing of 84.3275 the previous session, trading at 84.4425 versus the US dollar.

The rupee was also affected by the depreciation of most Asian currencies, with the Indonesian rupiah topping losses at 0.4%.

According to a senior trader at one bank, who talked to Reuters, public sector banks were observed bidding for dollars, with the demand most likely being connected to the November month-end futures contract expiring.

When the Reserve Bank of India (RBI) steps in to influence the futures market, traders usually use spot-future arbitrage trades to profit from the tiny difference between the two rates.

Additionally, the daily fix was quoting at a tiny premium, indicating strong desire to purchase dollars at the daily reference rate, which is released by the RBI in the afternoon and is used to settle cash-settled derivatives on the rupee.

According to a second trader at a bank, the pressure from dollar bids associated with the futures expiry is anticipated to continue until at least a little after noon local time.

In the meantime, the overnight dollar-rupee exchange rate increased, indicating probable dollar inflows.

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