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Rupee (Indian) recovers against Dirham from a record low

The Reserve Bank of India likely sold US dollars via state-run banks to prevent further depreciation in the rupee.

The Indian rupee rose on Tuesday, rebounding from Friday’s record low, supported by the central bank’s expected intervention and an increase in the offshore Chinese Yuan.

As of 9.15 a.m., UAE time, the South Asian currency was trading at 83.3375 versus the US dollar (22.71 against the UAE dirham), up 0.1 percent from the previous session’s closing rate of 83.4250 (22.73 dirhams).

The rupee fell to a record low of 83.43 in the last minutes of Friday’s session. Indian financial markets were closed on Monday.

The Reserve Bank of India (RBI) likely sold US dollars via state-run banks on Tuesday to prevent further depreciation in the rupee, five traders said.

Dilip Parmar, a foreign exchange research analyst at HDFC Securities, believes the rupee has transitioned into a weaker trading range, with 83.20 likely to be the immediate barrier.

The dollar index was marginally lower at 104.2 after falling 0.2% on Monday, while most Asian currencies increased modestly.

The offshore Chinese yuan was up at 7.24 after rising 0.7% on Monday, boosted by dollar sales from Chinese state-run banks.

Though short-term indicators point to a somewhat weaker yuan, depreciation is projected to be gradual and controlled, ING Bank stated in a Monday report.

Meanwhile, dollar-rupee forward premiums decreased, with the one-year indicated yield down 4 basis points (bps) to 1.54%, the lowest level in nearly four months.

Forward premiums were pressured by persistent receiving interest and an uptick in near-maturity US bond yields.

The one-year US Treasury yield rose to 5.01 percent in Asia trading hours, up 4 bps compared with its close on Friday.

Investors now await the release of US personal consumption expenditure (PCE) inflation data later this week.


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