MUMBAI: The Indian rupee hit a record low on Wednesday on aggressive dollar bids by local oil companies, importers and equity-related outflows, while likely central bank intervention capped losses, traders said.
The rupee closed at 83.3725 against the U.S. dollar, down 0.1% compared with its close at 83.28 in the previous session. The currency fell to an all-time low of 83.45 in the closing minutes of the session.
The Reserve Bank of India (RBI) stepped in and sold dollars via at least three state-run banks, preventing further losses, a trader at a foreign bank said.
With heavy dollar demand towards the end of the session, offers thinned after the rupee breached 83.40, pushing the currency past its previous low of 83.43 hit on Friday, a foreign exchange trader at a private bank said.
The RBI was likely active in the non-deliverable forwards (NDF) market to prevent a further depreciation after close of the domestic trading session, two senior traders at state-run banks said.
India’s forex reserves hit record high
The rupee had extended its decline in the NDF market on Friday.
Weakness in the offshore Chinese yuan and the Japanese yen also weighed.
The yen fell to a 34-year low, prompting an intervention warning from Japan’s finance minister.
The dollar index was little changed at 104.3 while U.S. bond yields were largely steady in Asia trading.
Continued weakness in Asian peers is likely to keep pressuring the rupee but the “proportion of decline could be lower on the back of RBI’s intervention to defend the rupee,” Dilip Parmar, a foreign exchange research analyst at HDFC Securities said.
Parmar expects the rupee to weaken to 83.50-83.70 levels in the near term if the pressure persists.
Markets await remarks from Federal Reserve Governor Christopher Waller later in the day for cues on the Fed’s thinking about rate cuts.
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