Rupee Marginally Weaker Amid Dollar Demand and RBI Intervention

The Indian rupee edged lower on Friday, trading at 86.5850 against the U.S. dollar by 09:55 a.m. IST, compared to its previous close of 86.55. The slight dip was driven by heightened dollar demand due to the maturity of positions in the non-deliverable forwards (NDF) market. However, likely intervention by the Reserve Bank of India (RBI) mitigated further losses.

Earlier, the rupee was quoted at 86.63 on the interbank system before the local spot market opened. Traders noted that RBI's intervention helped stabilize the currency despite ongoing pressure. Strong dollar bids at the daily reference rate, last quoted at a 0.65/0.90 paisa premium, contributed to rupee weakness, according to a foreign bank trader.

The rupee's decline came even as the dollar index softened to 109, marking its fourth consecutive session of losses, and U.S. Treasury yields fell. The 10-year U.S. Treasury yield stood near 4.60% in Asia trading after dipping 5 basis points in the previous session. Yields eased following comments from Federal Reserve Governor Christopher Waller, who suggested three or four rate cuts this year could occur if economic data weakens.

Despite a softer dollar and declining U.S. yields, the rupee faced pressure from strong NDF maturity-driven dollar demand. Amit Pabari, managing director at CR Forex, predicted the rupee will trade within a volatile range of 86.20 to 86.80 in the near term.

Investors are now focused on U.S. President-elect Donald Trump’s upcoming inauguration and potential policy announcements, which could influence global markets and currency trends.