Indian rupee dips, reversing intraday gains, as importer dollar demand dominates

According to Business Recorder, the Indian rupee gave up its early gains on Thursday and weakened as importers increased their dollar purchases. It closed at 95.54 per US dollar, down 0.1% on the day, having earlier touched a stronger level of 95.4050.

HDFC Securities analyst Dilip Parmar said the rupee opened flat before sliding under month-end dollar demand, short covering and broad risk aversion. He also pointed to a slight rebound in the dollar index, which came after recent inflation numbers and added to the downward pressure.

Traders said the one-day USD/INR swap cost jumped to roughly four times recent levels, as two days of inflows built up after Wednesday's bank holiday. Heavy dollar liquidity at banks, partly driven by inflows from the non-resident deposit scheme, added to the pressure. Banks face a Monday deadline for the FCNR(B) swap facility covering new deposits, and the RBI has allowed them to swap such dollars more than once in a week.