Rupee trades marginally weaker as oil bills jack up dollar demand

Rupee

The rupee stayed on a weak footing for the second day on July 5 as dollar demand from oil companies to pay for imports pushed the currency up.

At 9.10am, the home currency was trading at 82,07 to a dollar, down 0.05 percent from its previous close of 82.02.

"This decline can be attributed to the increased demand for the dollar from importers and weaker Asian currencies. According to market participants, the RBI engaged in dollar purchases on Monday, coinciding with the rupee reaching a nearly two-month high of 81.75. However, the pair traded in a tight range due to a holiday in the US markets resulting in minimal speculative trading activity," said CR Forex in its latest note.

The rupee could face difficulties due to the strengthening of the US dollar, largely influenced by signals from major central banks regarding potential interest rate increases in the near future, according to traders. A recent poll found 86 percent respondents predicting a 25-basis point rate hike at the upcoming FOMC meeting on July 25-26.

Traders expect the dollar to face more volatility ahead of the US non-farm payrolls employment report scheduled for Friday.

The decline in the rupee was sync with most Asian currencies against the dollar. Philippines peso fell 0.35 percent, China Renminbi 0.24 percent, China Offshore 0.22 percent, South Korean won 0.18 percent, Taiwan dollar 0.13 percent, while Singapore dollar, Thai Baht, Japanese yen and Indonesian rupiah were down 0.1 percent each.

The dollar index, which measures the US currency’s strength against major currencies, was trading at 103.13, up 0.10 percent from its previous close of 103.04.