The Indian rupee hovered in a thin band on Tuesday, wedged between a modest decline in the Chinese yuan and dollar sales from foreign banks, while dollar-rupee forward premiums extended their decline on the back of rising U.S. bond yields.
The rupee was at 85.4025 against the U.S. dollar as of 11:15 a.m. IST, nearly unchanged from its close of 85.40 in the previous session.
The dollar index was down 0.2% at 100.2, while the offshore Chinese yuan slipped to 7.22. Other regional currencies were mixed.
Dollar-rupee forward premiums, meanwhile, eased on the back of an uptick in U.S. bond yields amid persistent concerns about the fiscal position of the world's largest economy.
The 1-year dollar-rupee implied yield dipped to 2.04%, its lowest since March. The 1-year U.S. Treasury yield was a tad higher at 4.13%.
Expectations of a deep policy easing cycle by the Reserve Bank of India alongside uncertainty about the quantum of rate cuts the Federal Reserve may deliver over 2025 have also weighed on dollar-rupee forward premiums.
It's "quite likely that the 1-year (implied yield) dips below 2% and could find support near 1.90%," a trader at a Mumbai-based bank said.
The 1-year implied yield has eased 35 basis points from its peak of 2.39%, hit earlier in the month, amid worries about weakness in the rupee when the India-Pakistan conflict had flared up.
A cooling of the dollar-rupee overnight swap rate has also helped bring down dollar-rupee forward premiums, traders said.
In the medium term, currency markets are likely to keep their focus on developments surrounding individual countries' trade negotiations with the U.S.
President Donald Trump said last week that India had offered a trade deal that proposed "no tariffs" for American goods.
The rupee was at 85.4025 against the U.S. dollar as of 11:15 a.m. IST, nearly unchanged from its close of 85.40 in the previous session.
The dollar index was down 0.2% at 100.2, while the offshore Chinese yuan slipped to 7.22. Other regional currencies were mixed.
Dollar-rupee forward premiums, meanwhile, eased on the back of an uptick in U.S. bond yields amid persistent concerns about the fiscal position of the world's largest economy.
The 1-year dollar-rupee implied yield dipped to 2.04%, its lowest since March. The 1-year U.S. Treasury yield was a tad higher at 4.13%.
Expectations of a deep policy easing cycle by the Reserve Bank of India alongside uncertainty about the quantum of rate cuts the Federal Reserve may deliver over 2025 have also weighed on dollar-rupee forward premiums.
It's "quite likely that the 1-year (implied yield) dips below 2% and could find support near 1.90%," a trader at a Mumbai-based bank said.
The 1-year implied yield has eased 35 basis points from its peak of 2.39%, hit earlier in the month, amid worries about weakness in the rupee when the India-Pakistan conflict had flared up.
A cooling of the dollar-rupee overnight swap rate has also helped bring down dollar-rupee forward premiums, traders said.
In the medium term, currency markets are likely to keep their focus on developments surrounding individual countries' trade negotiations with the U.S.
President Donald Trump said last week that India had offered a trade deal that proposed "no tariffs" for American goods.
