Indian Rupee Declines Amid Rising Importer Dollar Demand, reflecting market volatility and economic pressure.
Indian rupee dips on importer dollar bids, far forward premiums retreat
The Indian rupee saw slight depreciation in early trading on Wednesday, pressured by increased dollar bids from importers amid subdued market activity at the beginning of 2025. As of 09:50 a.m. IST, the rupee stood at 85.6725 against the U.S. dollar, falling from its previous close of 85.6150.
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Persistent Downward Pressure on INR
The rupee has been under sustained pressure due to multiple factors, including:
- Persistent strength of the U.S. dollar
- Concerns about India’s slowing economic growth
This marks the seventh consecutive year of annual rupee depreciation, with experts predicting the trend to continue into early 2025.
Global Market Influence
The dollar index surged nearly 0.4% to 108.4, approaching a two-year high. Additionally, the 10-year U.S. Treasury yield climbed by 3 basis points to 4.57%, further adding pressure on emerging market currencies, including the Indian rupee.
Market Outlook
- Rupee Trading Range: Analysts expect the rupee to hover between 85.40 to 85.70 against the dollar during the day.
- Forward Premiums: The 1-year implied yield retreated by 4 basis points to 2.50%, cooling off from recent highs reached due to unusual surges in swap rates.
Expert Insights
Ani Bhansali, Head of Treasury at Finrex Treasury Advisors, advised importers to buy on dips to hedge against further depreciation.
Muted Market Activity: Indian Rupee Declines Amid Rising Importer Dollar Demand
With regional markets closed for the New Year holiday and subdued activity on India’s equity benchmark indexes, market movements are expected to remain limited in the short term.
The rupee’s performance in the coming weeks will depend heavily on global dollar trends, U.S. bond yields, and domestic economic indicators.
Indian Rupee Declines Amid Rising Importer Dollar Demand, reflecting market volatility and economic pressure.
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