By Nimesh Vora
MUMBAI (Reuters) - The Indian rupee slipped between gains and losses in choppy trading on Tuesday, while the USD/INR overnight swap rates declined, fuelled by cash dollar outflows, traders said.
The rupee dropped to as much as 81.4425 to the dollar, adding to its decline in the previous session. The local unit had climbed to a seven-week high of 80.5200 on Monday.
Meanwhile, the overnight USD/INR swap rate has fallen to 0.46/0.48 paisa. Importers and exporters access the cash swap market to swap the dollars traded in the spot market.
A trader at a private bank said the cash dollar outflows via a large foreign bank explains the move higher in spot and the fall in the overnight cash rates over the last two days.
For a cash dollar outflow, an importer will use the buy/sell USD/INR swap to take the delivery of the dollars it bought in the spot market on the same day.
The buy/sell swap, thanks to the dollar outflows, has pushed the implied overnight rupee rates lower than the domestic call rates.
At a swap rate of 0.46 paisa, the implied overnight rupee rate is just above 5%. The weighted average TREPS rate is 5.70%.
(Reporting by Nimesh Vora; Editing by Savio D'Souza)