(Reuters) - The Indian rupee posted a moderate decline against the dollar on Friday amid thin trading volumes, while forward premiums held near the highest level in a month.
The rupee last traded at 82.81 to the U.S. dollar, compared with 82.7550 in the previous session. The volumes on the interbank order matching system were at $4.2 billion, down from the 7-day daily average of $5.6 billion.
The 1-year USD/INR forward implied yield was little changed at 2.07%, having climbed almost 30 basis points so far this month and about 45 basis points from the year-to-date lows. Forward premiums are expected to rise further from here, according to some analysts.
"Premiums moving up is an incentive for exporters to sell (dollars forward)," Sajal Gupta, head forex and rates at Edelweiss Financial Securities, said. "And its a natural disincentive for importers to buy."
He pointed out that rupee has been the worst performer among Asian currencies over several weeks and "that is another form of volatility for the rupee."
The rupee's Asian peers were mixed while the dollar index was little changed at near 104 level. The Japanese yen is at 131.62 to the dollar, a day after the near 4% rally on back of the Bank of Japan's hawkish policy twist.
Investors following the BOJ policy and hawkish Federal Reserve and European Central Bank remarks are eyeing yields. Currently, the market's outlook for rates is less hawkish than central banks. Any revision to these expectations could impact risk appetite, demand for rupee and other Asian currencies.