<p>Month-end flows and speculative positions betting on a rise in the Indian rupee are likely responsible for the increase in demand for cash dollars this week, traders said on Tuesday.</p>.<p>This demand has pushed the USD/INR cash swap rate to levels below those implied by the rupee and dollar overnight rates.</p>.<p>For instance, the USD/INR cash swap on Monday declined to 0.36 paisa, implying an overnight rupee funding rate of 5.40 per cent. That compares to the call rate of near to 6 per cent. On Tuesday, the swap rate was at 0.42 paisa.</p>.<p>The cash dollar crunch this week is likely to be temporary and should improve once the month is over, a swap trader at a state-run bank said.</p>.<p>The demand for dollars towards the end of the month can be skewed by the USD/INR forwards roll-overs and corporate dollar outflows.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/business/business-news/sensex-may-hit-80000-if-india-included-in-global-bond-indexes-morgan-stanley-1166495.html" target="_blank">Sensex may hit 80,000 if India included in global bond indexes -Morgan Stanley</a></strong></p>.<p>The USD/INR spot was marginally higher at 81.7075, underperforming its Asian peers by a wide margin. The offshore Chinese yuan and the Korean won rallied more than 1 per cent.</p>.<p>Another trader said that a build-up in bets that the rupee will gain against the dollar is possibly contributing to the fall in the cash swap rate.</p>.<p>The outlook on the rupee has improved due to expectations that the dollar index and U.S. yields had likely peaked. Further, there has been a turnaround in foreign equity inflows, pushing Indian equities to record highs.</p>.<p>The trader also noted that the Reserve Bank of India has not been required to intervene to protect the rupee as it did last month.</p>.<p>The decline in the cash swap rate has led to a drop in forward premiums. The 1-year USD/INR forward implied yield on Monday fell to levels last seen more than a decade back.</p>
<p>Month-end flows and speculative positions betting on a rise in the Indian rupee are likely responsible for the increase in demand for cash dollars this week, traders said on Tuesday.</p>.<p>This demand has pushed the USD/INR cash swap rate to levels below those implied by the rupee and dollar overnight rates.</p>.<p>For instance, the USD/INR cash swap on Monday declined to 0.36 paisa, implying an overnight rupee funding rate of 5.40 per cent. That compares to the call rate of near to 6 per cent. On Tuesday, the swap rate was at 0.42 paisa.</p>.<p>The cash dollar crunch this week is likely to be temporary and should improve once the month is over, a swap trader at a state-run bank said.</p>.<p>The demand for dollars towards the end of the month can be skewed by the USD/INR forwards roll-overs and corporate dollar outflows.</p>.<p><strong>Also Read | <a href="https://www.deccanherald.com/business/business-news/sensex-may-hit-80000-if-india-included-in-global-bond-indexes-morgan-stanley-1166495.html" target="_blank">Sensex may hit 80,000 if India included in global bond indexes -Morgan Stanley</a></strong></p>.<p>The USD/INR spot was marginally higher at 81.7075, underperforming its Asian peers by a wide margin. The offshore Chinese yuan and the Korean won rallied more than 1 per cent.</p>.<p>Another trader said that a build-up in bets that the rupee will gain against the dollar is possibly contributing to the fall in the cash swap rate.</p>.<p>The outlook on the rupee has improved due to expectations that the dollar index and U.S. yields had likely peaked. Further, there has been a turnaround in foreign equity inflows, pushing Indian equities to record highs.</p>.<p>The trader also noted that the Reserve Bank of India has not been required to intervene to protect the rupee as it did last month.</p>.<p>The decline in the cash swap rate has led to a drop in forward premiums. The 1-year USD/INR forward implied yield on Monday fell to levels last seen more than a decade back.</p>