Indian rupee: Rupee slips to 87.12 despite fall in dollar index

Rupee forward premiums have dropped after the Reserve Bank of India (RBI) announced a raft of measures, including a dollar rupee buy-sell swap, to boost domestic liquidity, likely stoking dollar demand Thursday.

“There was hedging demand, and, therefore, dollar demand as forward premiums fell as much as 15 basis points,” said a trader at a public sector bank.

The rupee’s decline, however, bucked the secular retreating trend in the dollar index, which weakened to 104 levels.

The rupee had closed Wednesday at 86.95, LSEG data showed. The weakness in the currency comes after it gained 0.3% on Wednesday, its largest single day gain since February 11.

Agencies

The dollar index was at 104.1 during trading hours on Thursday – its lowest level since November 2024 – as weak economic data from the US pointed to a slowdown.Forward premiums were at 2.02% during the early trading hours, down from 2.17% the previous day.Hedging demand increased after the RBI announced another $3 billion dollar rupee buy-sell swap late on Wednesday. Along with the foreign exchange swap, the RBI also announced open market operations of Rs 1 lakh crore to support deficit liquidity, and the quantum exceeds market expectations, Nomura said.

“We feel the RBI is addressing the liquidity situation in a proactive manner. That said, we are a little surprised, given the auction last week received just $16 billion of bids,” Nomura said Thursday.

Traders will now be looking for cues from the US non-farm payroll data expected on Friday after market hours to gauge the interest rate trajectory in the world’s biggest economy.