The Indian rupee failed to hold on to its positive opening versus the U.S. currency on Wednesday, slipping below 82.50 on dollar demand from foreign banks and importers, traders said.The rupee last traded at 82.5950 to the dollar, compared with 82.49 in the previous session. The local currency had opened at 82.31.
The rupee struggled after the open on dollar demand from foreign banks and from a large public sector bank, according to traders. Foreign banks were likely buying dollars for their custodial and offshore clients and the public sector banks on behalf of importers, traders said.
The rupee’s Asian peers mostly fared well on Wednesday following the U.S. inflation data. The data was broadly in line with expectations, making investors wager on a 25 basis points rate hike by the U.S. Federal Reserve next week.On-target inflation data and receding jitters over contagion in the banking sector cooled expectations regarding the possibility of a 50 basis points rate hike, Amit Pabari, managing director at CR Forex, said.The U.S. rates markets continued to exhibit significant volatility, a development that is likely to be negative for rupee and most Asian currencies.
The 2-year U.S. yield on Tuesday held a near-60 basis points range on Tuesday, slipping to near 3.80% at one point. It reached a high of 4.40% on Wednesday.Indian equities, like the rupee, were on the defensive after the open. The Nifty 50 index fell below 17,000 to its lowest level since October.
Meanwhile, India’s merchandise trade deficit in February stood at $17.4 billion, data released on Wednesday showed. That was marginally lower than the $17.8 billion recorded in the previous month, and below the $19 billion forecast in a Reuters poll.