The Indian rupee weakened on Monday after rising for three days in a row. Fresh demand for dollars from importers and pressure from overseas markets erased some of the recent gains supported by the RBI. Even so, the rupee stayed below the 90-per-dollar level, showing that it remains largely stable.
The rupee closed at 89.65 against the dollar, weaker by about 0.4 percent from the previous session. In the last three trading days, the currency had strengthened steadily and touched a near one-month high of 89.25 on Friday, aided by strong intervention from the Reserve Bank.
During today's session, the rupee moved in a narrow band between 89.45 and 89.72. Traders said importer hedging demand picked up as companies rushed to lock in dollar costs, while selling pressure from the non-deliverable forwards (NDF) market weighed on the currency.
Forward premiums continued to climb sharply. The one-month dollar-rupee premium rose to 47 paise, while the one-year implied yield jumped around 20 basis points to 3.05 percent, both hovering near multi-year highs. Market participants attributed the rise to excess dollar liquidity, unwinding of positions and strong hedging demand in offshore markets.
Elsewhere, Asian currencies were largely on the defensive, even as the dollar index eased slightly to around 98.5.
