The rupee ended 13 paise down against the dollar to 86.46 on Thursday due to a decline in the most regional currencies and demand for dollars from foreign banks, said forex traders.
The depreciation in the currency is expected to continue, though the pace may become slow as the bearish sentiment around the rupee has subsided, said experts.
The dollar index rose 0.1% to 108.289. Asian currencies were mostly weaker, with the Malaysian ringgit, down 0.4%, leading the losses.
Traders said that the strong dollar demand from foreign banks weighed on the rupee. Further, the cost of betting against the rupee’s decline in the non-deliverable forward (NDF) market has dropped from a two-year high and a volatility gauge has dipped, indicating that the bearish bias has marginally subsided.
The one-month NDF points, which provide a sense of how market participants expect the currency to move, dropped to 23 paise from a two-year high of 30.5 paisa hit earlier in January.
Unless the dollar index falls sharply or the Chinese currency rises, chances of the rupee appreciating against the dollar is little, barring some intraday movements, said market participants.
“Due to inflows and flexibility on the RBI side, we are getting a two-way movement. There were some bond market-related inflows which allowed the rupee to gain, while an uptick in oil took the rupee back to 86.52. At 86.52, there was good selling momentum,” said Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury.
Foreign portfolio investors remained buyers of dollars, keeping the dollar well bid and giving intra-day opportunities for exporters to sell.
Brent crude, the global oil benchmark, was down 0.16% to $78.87 per barrel in futures trade.
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