On Monday, the Indian rupee was flat in its trade because of constant corporate dollar demand, and it ended at 89.9750 against the U.S. dollar which was marginally lower than the previous Friday ending at 89.85. The local currency started with the opening of 89.88 and in the trading session slipped steadily being only slightly short of the psychologically significant mark of 90.
Players cited that other than corporate dollar buying, there was little trader and speculator activity that was evident in comparatively shallow volumes all day. A trader with a private bank said that there was minimal speculative activity and the market was dominated by corporate demand. There were reports earlier that day, that bankers were ready to pay a premium of 1.5-paisa above the RBI reference rate to acquire dollars, which showed a continuing underlying demand.
Rupee has been floating around the 90 in the session and is considered to be susceptible to hitting the mark this week, particularly with end-year volumes expected to be thin, and thus accentuating short-term flows driven actions. According to analysts, the corporate demand and low liquidity may exert extra pressure on the currency.
The rupee was also affected by regional trends, as most currencies in Asia are weakened and U.S dollar index is at 98.05 which is another headwind. The forward dollar/rupee premiums were calm, and the previous week concluded with a number of volatile movements, and the implied yield at one year indicated that the market people were shy with an increment of 23 basis points at approximately 2.80.
Global investors are taking interest in the drop of the rupee against the dollar although it has been weakened in the recent past. This has been emphasized by UBS Asset management and especially with the much-awaited trade agreement between India and the U.S., this will give the rupee a long-term boost.
The market observers are currently keeping a keen eye on year-end flows, corporates need in the foreign exchange and world cues that would most probably determine the path of the rupee in the coming days.
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