MUMBAI: The Indian rupee dropped to its lowest level in more than three months on Friday, tracking the weakness in its Asian peers and pressured by sustained dollar demand from local importers.
The rupee was at 83.3450 against the US dollar as of 10:00 a.m. IST, weaker by 0.2% compared with its close at 83.1475 in the previous session.
The currency hit an intra-day low of 83.37, its weakest level since Dec. 13. The dollar index rose 0.2% to 104.21, its highest in more than three weeks after US economic data signalled continued strength in the world’s largest economy.
Data released on Thursday showed that US initial jobless claims fell and existing home sales surged more than expected to a one-year high in February.
Asian currencies weakened across the board with the Korean won down over 1.3% and leading losses.
The offshore Chinese yuan fell to an over-four-month low of 7.26, prompting state-owned banks to step in to defend the currency.
Dollar demand from local corporates ahead of the closing of India’s financial year also weighed on the rupee, while state-run banks were spotted “mildly” selling dollars in early trading, a foreign exchange trader at a private bank said.
Meanwhile, dollar-rupee forward premiums slipped with the one-year implied yield down 2 basis points (bps) at 1.61%, pressured by an uptick in US bond yields.
Indian rupee to rise following ‘modestly dovish’ Fed policy
Inflows into Indian debt and equities are likely to continue but a change in sentiment could turn the dollar-rupee pair into a “buy-on-dips from sell-on-upticks,” said Anil Bhansali, head of treasury at Finrex Treasury Avisors.
Overseas investors have net bought $9.2 billion worth of Indian equities and bonds so far this year, of which $6.2 billion worth has come this month alone.
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