Continued demand for dollars from local importers, including oil companies, has put pressure on the local currency in recent weeks, traders said.
Months of uncertainty over a US-India trade deal have also disrupted India’s currency hedging landscape as expectations that the rupee could further weaken importers’ hedges and kept exporters hesitant.
In the broader region, Asian currencies fell mostly between 0.1% and 0.5%, while the dollar index edged higher after a pullback caused by signs of weakness in U.S. labor market data in the previous session.
A vote in the US legislature to reopen the country’s government later in the day is the focus. If approved, this could lead to the release of key data points that are expected to influence the US Federal Reserve’s rate cut trajectory. “The employment data will be critical to whether the Fed can continue to cut spending and is a key part of our view that the dollar could weaken significantly as we approach the end of the year,” MUFG analysts said in a note. BSE Sensex and Nifty 50 each ended xx% higher.
The ongoing negotiations between the US and India on a trade pact also remain a focus for the rupee. Analysts say a breakthrough could lift the currency substantially and boost foreign portfolio inflows into local stocks.
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