The rupee on Thursday snapped a two-day gaining streak, weighed down by fresh dollar demand linked to forward maturities, dealers said. Demand for dollars from oil companies further pressured the local currency.
The rupee settled at 95.76 per dollar, compared with the previous close of 95.27. Meanwhile, the yield on the benchmark 10-year government bond softened by 2 basis points to 6.92 per cent, as optimism persisted over potential foreign inflows following the Reserve Bank of India’s recent measures.
The rupee has depreciated 6.14 per cent in the current calendar year. In the current financial year, it has weakened 0.99 per cent against the greenback.
Market participants said the domestic currency came under pressure as escalating tensions between Iran and the US fuelled risk aversion in global markets, boosting the dollar index and pushing crude oil prices higher.
“After two days of gains, the rupee depreciated due to fresh dollar demand driven by forward maturities and a recovery in the dollar index amid safe-haven flows,” said Dilip Parmar, research analyst at HDFC Securities.
According to Parmar, the dollar-rupee pair has faced resistance at the 95.80 level in recent sessions. “A decisive breach above 95.80 could trigger sharp short-covering and aggressive hedging, paving the way towards 96.50. On the downside, 94.70 per dollar continues to act as a strong base,” he said.
The RBI’s outstanding net short dollar position in the forward market declined for the first time in six months, to $95.30 billion at the end of April from $103.06 billion at the end of March, the RBI data showed.
Of the $95 billion net short dollar position, $13.52 billion was in one-month contracts, $10.90 billion in contracts with maturities of one to three months, and $20.15 billion in contracts maturing between three months and one year. The remaining $50 billion was in contracts with maturities of more than one year.