By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee weakened slightly on Friday, pressured by month-end dollar demand from local oil companies, while dollar-rupee far forward premiums retreated as investors pared back bets of another outsized U.S. rate cut.
The rupee was at 83.6850 against the U.S. dollar as of 11:20 a.m. IST, compared to its previous close of 83.6425.
A pickup in the dollar index also weighed on the local currency, while its regional peers were mixed with the offshore Chinese yuan down 0.4% after touching a 16-month high of 6.96.
Consistent dollar demand from local oil companies has contributed to keeping the rupee on the weaker side, a foreign exchange trader at a state-run bank said.
While the rupee had touched a near-three month high of 83.48 last week, it has since trimmed its gains.
The currency has been unable to advance much despite a strong pickup in inflows over September, indicating that the Reserve Bank of India has likely been buying dollars, traders said.
Overseas investors have net bought $10 billion of local debt and equities so far this month, up from $3 billion in the previous month.
The dollar-rupee pair is “is finding solid support around 83.50, with the potential to rise toward the 83.75–83.80 range,” Amit Pabari, managing director at FX advisory firm CR Forex said.
Dollar-rupee far forward premiums slipped, with the 1-year implied yield down 4 basis points to 2.37% after strong U.S. economic data prompted traders to pull back bets of a 50 bps rate cut in November.
Markets currently expect a 49% chance of a 50 bps cut by the Federal Reserve at its next meeting, compared to around 60% a day ago.
For the rest of the year, rate cut bets for the rest of 2024 stand at 72 bps compared to 75 bps earlier.
(Reporting by Jaspreet Kalra; Editing by Varun H K)
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