“The rupee appreciated significantly after the RBI benchmark as year-end obligations were met and rebalancing of flows took effect,” said Dilip Parmar, forex research analyst at HDFC Securities.
“Yet the currency’s gains have been supported by limited liquidity and a steady stream of dollar supply from banks.”
Parmar expects the coin to trade between 89.40 and 90.26 in the near term.
Several traders said business activity remained subdued and focused on routine short-term flows, buying or selling dollars to pay debts or convert receivables, while few companies made new directional bets. Hedging was limited, indicating that firms were reluctant to add longer-term coverage at current levels.
The rupee had a narrow range, with participants citing the central bank’s expected presence around the 90 level as an important safety net. This perception has anchored spot moves and reinforced a sideways trend in thin year-end trading. Dollar/rupee term premiums have declined again, with the one-year implied rate falling by around 10 basis points to 2.71%.
The pullback followed the central bank’s plan for a $10 billion buy-sell swap and a drop in rollover fees from Dec. 31 to Jan. 1, traders said.
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