The rupee fell to 84.88 against the U.S. dollar, reflecting a decrease of 0.04% for the day. At 10:00 a.m. IST, the currency was trading at 84.8750.
Traders noted that state-owned banks were seen selling dollars, likely acting on behalf of the Reserve Bank of India (RBI).
Increased demand for dollars in the NDF market, coupled with significant purchases by local importers, particularly in the oil sector, has put pressure on the rupee in recent trading sessions, a trader from a state-run bank commented.
The potential for a weaker yuan adds another challenge for Asian currencies, following a Reuters report indicating that China may consider allowing the yuan to depreciate in response to tariff uncertainties under the incoming Donald Trump administration.
On the same day, Asian currencies showed mixed performance, while the offshore Chinese yuan appreciated by 0.1% to 7.26 after hitting a low of 7.29 in the previous session.
The dollar index remained stable at 106.5, as U.S. inflation data led investors to nearly fully anticipate a rate cut by the Federal Reserve in December. These heightened expectations did not significantly hinder the dollar's momentum.
ING Bank noted in a report that they expect another 25 basis point cut from the Fed next week, but the new forecasts are likely to indicate a more gradual series of cuts in 2025. Such a slower easing cycle from the Fed is expected to bolster the dollar.
Dollar-rupee forward premiums increased due to rising expectations of a U.S. rate cut, with the 1-year implied yield climbing 7 basis points to 2.22%, marking its highest level in December thus far.