The rupee declined for the sixth time in seven sessions on Wednesday, slipping briefly past 86 to the U.S. dollar, as traders unwound bullish positions amid persistent demand for the greenback.
The rupee weakened to 86.0225 before recovering marginally to end the day 0.4% lower at 85.90.
The currency has declined nearly 1.5% from a high of 84.78 it touched last Monday, making it one of the worst-performing Asian currencies over this period.
"There is no real let-up in dollar demand from corporates and it would seem that dollar/rupee shorts are done for now, both in onshore spot and in the non-deliverable forward market," a currency trader at a bank said.
Speculators are no more inclined to sell the dollar/rupee pair on rallies, unless "things improve" for the rupee, he said.
The rupee has been underperforming regardless of what the dollar index or Asian peers are doing.
"Frankly, most of us didn’t expect this," the trader said, forecasting more losses for the rupee in the coming days.
Forex advisors are urging clients with near-term dollar payables to exercise caution.
The risk-reward favours "proactive cover" rather than waiting for dips on dollar/rupee, Kunal Kurani, vice president at Mecklai Financial said.
The dollar index was marginally higher on Wednesday. Market focus is on the May U.S. non-farm payrolls report on Friday, which could influence expectations around the Federal Reserve’s policy path.
Asian currencies were mostly weaker awaiting updates on U.S. trade deals. President Donald Trump’s administration has set a Wednesday deadline for revised trade proposals from key partners.
A call between Trump and Chinese President Xi Jinping is reportedly in the works amid mutual accusations of backtracking on tariff rollback commitments.
