The rupee gained slightly on Wednesday (August 7, 2024) aided by a broad improvement in risk appetite but strong dollar bids in the non-deliverable forward (NDF) market and importers’ hedging demand are likely to keep the currency’s gains in check, traders said.
The rupee was at 83.9150 against the U.S. dollar as of 10:50 a.m., up slightly from its close at 83.9525 in the previous session.
The currency had fallen to its all-time low of 83.96 on Tuesday hurt by a decline in its Asian peers and due to pressure from unwinding of carry trades that funded long bets on the rupee using the Chinese yuan and the Japanese yen.
Weakness in the rupee was capped by intervention by the Reserve Bank of India alongside instructions to top banks to refrain from excessive speculation against the rupee as the currency came close to falling below 84/$.
On Wednesday, dollar bids from importers alongside consistent dollar demand in the NDF market limited the rupee’s gains, traders said.
The dollar index was up 0.3% at 103.3 while most Asian currencies slipped as markets settled after being gripped by heightened volatility over the last two trading sessions spurred by unwinding of carry trades and concerns of a slowdown in the U.S.
“In the short term, the Fed will likely support the USD by pushing back the market’s aggressive bets for 100 bps of cuts in the remaining three FOMC meetings this year,” DBS Bank said in a note.
Benchmark Indian equity indices, the BSE Sensex and Nifty 50 were up over 1% each after falling for the last two trading sessions which saw foreign investors pull out over $1.5 billion from local stocks amid a slump in global equities.