The rupee closed at 88.63 against the U.S. dollar, down slightly from 88.5675 in the previous session.
Continuous dollar demand from local importers, including oil companies, has exerted pressure on the local currency over the last few weeks, traders said.
Months of uncertainty over a U.S.-India trade deal have also distorted India’s FX hedging landscape, as expectations that the rupee may weaken further amplified importer hedging and kept exporters hesitant.
In the wider region, Asian currencies mostly fell between 0.1% to 0.5%, while the dollar index nudged higher following a retreat triggered by signs of weakness in U.S. labour market data in the previous session.
A U.S. legislature vote to reopen the country’s government later in the day is in focus. If approved, that could lead to the release of key data points expected to influence the U.S. Federal Reserve’s rate cut trajectory.
“The jobs data will be key to whether the Fed can continue to cut and is an important element of our view that the dollar can weaken notably as we approach the end of the year,” analysts at MUFG said in a note.
An uptick in wagers on a rate cut next month alongside optimism over the reopening of the U.S. government helped boost stocks in Asia, with India’s benchmark indexes, the BSE Sensex and Nifty 50 each ending xx% higher.
Ongoing negotiations between the U.S. and India over a trade pact also remain a focal point for the rupee. Analysts say a breakthrough could help lift the currency substantially and spark foreign portfolio inflows into local stocks.
