Indian rupee may extend losses despite RBI’s move to hold the line at 90

MUMBAI: The Indian rupee is expected to come under more pressure on Tuesday, with the rise in U.S. Treasury yields adding to the strain a day after the Reserve Bank of India’s intervention prevented the currency from slipping past 90.

The 1-month non-deliverable forward indicated the rupee will open in the 89.62-89.64 range versus the U.S. dollar, after settling 0.1% lower at 89.5475 on Monday.

The rupee’s slide picked up pace on Monday after it broke past 89.50, a level the RBI had previously defended, triggering small stop-loss orders and a burst of accelerated dollar buying from importers.

That combination pushed the rupee to a record low of 89.7575, extending recent weakness. Bankers said stepped-up RBI intervention ultimately halted the slide, preventing a break past the key 90 level and curbing a deeper selloff.

The rupee’s drop on Monday stood out all the more because it came despite India’s stellar gross domestic product (GDP) print and on a day when Asian cues were not exerting downward pressure.

The rupee “reaction yesterday just reinforces how skewed flows currently are”, a currency trader at a private sector bank said.

“It often feels like the RBI is the only real seller (of dollar/rupee) out there — if they step away, it just runs.”