The Indian rupee weakened slightly on Wednesday, pressured by a fall in Asian peers, while the dollar-rupee overnight swap rate improved, lifting forward premiums higher as well.
The rupee was at 83.3225 against the U.S. dollar as of 10:25 a.m. IST, compared with its previous close at 83.28.
The dollar index inched up to 104.4, while Asian currencies fell, weighed down by weakness in the offshore Chinese yuan and the Japanese yen, which were down about 0.1% each.
The dollar-rupee overnight swap rate rose to 0.26 paisa after hovering close to or below 0.10/0.12 paisa levels for most trading sessions since March 19.
The improvement in the overnight swap rate also helped lift near and far forward premiums, a foreign exchange trader at a state-run bank said.
The one-year implied was up 5 basis points (bps) at 1.61% and off its lowest level in four months hit on Tuesday.
“Paying interest appears to have picked up since late in the session yesterday,” the trader said, adding forward premiums were seeing good bids in early trading.
Meanwhile, data released on Tuesday delivered a mixed picture of the U.S. economy, with durable goods orders rising more than expected in February, while consumer confidence for March came in below expectations.
While U.S. bond yields initially rose in light of the data, they ended lower following strong demand at an auction for five-year notes.
The rupee is expected to see “sideways price action” between 83.20 and 83.40 during the session, with the Reserve Bank of India expected to defend the currency from hitting all-time lows, foreign exchange advisory firm IFA Global said in a note.
The rupee had fallen to its record low of 83.43 last week but has since recovered.
