By Jaspreet Kalra
MUMBAI (Reuters) – The Indian rupee weakened on Thursday, pressured by dollar demand by importers, even as the greenback lingered near a four-month low against its major peers amid concerns about a slowdown in the U.S. economy.
The rupee closed at 87.1150 against the U.S. dollar, down about 0.2% on the day.
Asian currencies were trading mixed, while the dollar index softened 0.1% to 104.1, hovering close to its lowest level since November.
“While initially the expectation was that it (USD/INR) will follow the dollar lower, bids picked up sharply below 87,” a trader at a private bank said. The dollar-rupee pair touched a low of 86.89 in early trade before recovering swiftly.
The trader reckons that even a modest recovery in the dollar will push the rupee back towards 87.50, while sustained dollar weakness could move it towards 86.50 in the near-term.
A string of economic data, including private payrolls on Wednesday, pointed towards a cooling of the U.S. economy, weighing on the dollar and bond yields.
Prospects of a global trade war, a fiscal bazooka in Europe and China’s emergence as tech race leader have all hurt sentiment surrounding the U.S. economy as well, marking a potential turning point for drawing investor capital away from the country.
“Our view is that the dollar move is overblown. The reality of prolonged US tariffs and their impact on Europe argues for a USD rebound in the coming weeks,” ING Bank said in a note.
Meanwhile, dollar-rupee forward premiums dropped sharply after the Reserve Bank of India (RBI) announced it would conduct a $10 billion 3-year dollar-rupee buy-sell swap later this month.
The 1-year implied yield dropped as much as 15 basis points to 2.02% in early trade before paring its decline. Investors now await the U.S. non-farm payrolls data, due on Friday, for cues on the future path of U.S. policy rates.
(Reporting by Jaspreet Kalra; Editing by Sonia Cheema)
