Finance
The Indian rupee failed to hold its positive start against the US dollar on Wednesday, falling below 82.50 due to dollar demand from foreign banks and importers, traders said. The rupee last traded at 82.5950 per dollar, down from 82.49 the previous session. The local currency had started the day at 82.31.
According to traders, the rupee struggled after the open due to dollar demand from foreign banks and a large public sector bank. Traders believe foreign banks were purchasing dollars on behalf of importers for their custodial and offshore clients, as well as public sector banks.
Following the release of US inflation data, the rupee’s Asian counterparts fared mostly well on Wednesday. The data was broadly in line with expectations, prompting investors to bet on the US Federal Reserve raising interest rates by 25 basis points next week. On-target inflation data and easing concerns about banking sector contagion have tempered expectations for a 50 basis point rate hike, according to Amit Pabari, managing director at CR Forex. The rates markets in the United States have remained volatile, which is likely to be negative for the rupee and most Asian currencies.
On Tuesday, the 2-year US yield held a near-60 basis point range, slipping to near 3.80% at one point. On Wednesday, it reached a high of 4.40%. After the open, Indian equities, like the rupee, were on the defensive. The Nifty 50 index dropped below 17,000 for the first time since October.
Meanwhile, India’s merchandise trade deficit in February was $17.4 billion, according to data released on Wednesday. This was slightly less than the $17.8 billion recorded in the previous month and less than the $19 billion predicted in a Reuters poll.
Source:FE
