By Nimesh Vora
MUMBAI, August 4 (Reuters) – The Indian rupee slipped after its attempts at a recovery on the back of a weaker dollar fizzled out amid outflows and sustained dollar demand from oil companies, traders said.
The rupee opened higher, tracking the dollar’s broad retreat following a weaker-than-expected U.S. jobs report that raised expectations of a September rate cut by the Federal Reserve. However, dollar buying from importers, particularly state-run oil companies, caused the local currency to drop.
The rupee was at 87.6050 at 13:12 IST, to the U.S. dollar, off the day’s high of 87.2250 and down from Friday’s level of 87.5400.
“There has been importer buying through the session, outflows are adding to the pressure,” a trader at a private sector bank said.
“Despite the soft dollar, the demand on (USD/INR) dips is intact.”
Traders said the rupee’s moves on Monday reflect India-specific demand for dollars and an overall weaker trend.
The rupee had climbed to near 87.20 in opening trades amid the market pricing in a roughly 80% chance of a Federal Reserve rate cut in September meeting following the jobs report.
Further, MUFG Bank pointed out in a note that market pricing for Fed rate cuts has increased to 64 basis points for the remainder of the year, up from 33 prior to the payrolls release.
U.S. bond yields pushed lower on Friday.
On back of the drop in U.S. yields and Fed rate cut expectations, USD/INR forward premiums climbed. The implied yields on the 1-year forward premium rose 9 basis points to 2.05%.
(Reporting by Nimesh Vora; Editing by Harikrishnan Nair)
