MUMBAI: The Indian rupee closed near its all-time low on Monday as lingering foreign portfolio outflows and corporate dollar demand kept up pressure on the South Asian currency.
The rupee settled at 88.76 against the U.S. dollar, its weakest ever closing level and down slightly from its close at 88.7175 on Friday. The currency declined to an all-time low of 88.7975 last week.
After starting the session with a modest uptick, the localcurrencydrifted lower through the session, averting a sharper decline due to dollar sales by multiple state-run banks, which traders said were likely on behalf of the Reserve Bank of India (RBI).
The RBI has frequently intervened to support the rupee over recent sessions as worries over the impact of steep U.S. tariffs on Indian goods and tighter immigration policies hurt the local currency.
Concerns over further depreciation of the rupee have prompted importers to step up hedging, keeping the rupee’s upticks short-lived, an FX salesperson at a foreign bank said.
The rupee’s weakness has persisted even as the dollar slipped broadly. On the day too, the dollar eased 0.2% to 97.92 but this offered little comfort to the rupee.
Meanwhile India’s benchmark equity indexes, the BSE Sensex and Nifty 50 .NSEI closed nearly flat after rising early in the session.
Foreign investors have net sold nearly $2 billion of local stocks so far this month, pushing up year-to-date outflows to nearly $17 billion.
“Relentless FPI outflows … combined with strong importer hedging and delta hedge demand from option sellers (who must buy USD to maintain their positions), are creating significant technical and capital pressure that is pushing the pair (USD/INR) toward new highs,” said Anindya Banerjee, head of currency and commodity research at Kotak Securities.
Elsewhere, Asian currencies were mostly stronger as investors awaited U.S. economic data for cues on the Federal Reserve’s rate path while also keeping an eye on a looming U.S. government shutdown.
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