The Indian rupee was little changed on Wednesday as dollar demand from domestic corporates ate into slight early gains supported by dollar inflows.
The rupee was at 22.72 against the UAE dirham as of 9.10am UAE time, barely changed from its close at 22.7207 in the previous session. The currency inched up in early trade to a high of 22.713 but soon pared those gains.
The dollar index was at 104.7 after declining 0.2 per cent on Tuesday, while Asian currencies were mixed.
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It looks like the rupee will weaken further from here unless the Reserve Bank of India (RBI) steps in to supply dollars, a foreign exchange trader at a foreign bank said.
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The rupee had fallen to a record low of 83.45 last week, prompting the central bank to intervene, traders said.
The “RBI has intervened to accumulate FX reserves meaningfully this year, but was surprisingly more hands-off when INR was selling off, perhaps indicating some desire to prevent excessive INR outperformance against a basket of currencies,” MUFG Bank stated in a April 3 note.
India’s foreign exchange reserves rose to a record high of $642.63 billion as of March 22, according to data released by the central bank.
Brent crude oil futures rose above $89 per barrel on Tuesday for the first time since October on concerns around supply being threatened by geopolitical conflicts.
US bond yields also rose after data showed that new orders for U.S.-manufactured goods grew more than expected in February.
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The 10-year U.S. Treasury yield peaked at 4.40 per cent on Tuesday, its highest level since November, before settling lower.
Meanwhile, a pair of US Federal Reserve policymakers said on Tuesday it would be “reasonable” to cut US interest rates three times this year.