MUMBAI: The Indian Rupee drifted towards record low at 88.80 on Monday, dragged down by broad based dollar strength and dollar outflows. After showing some resilience through mid-October, the currency has once again come under pressure, driven by oil-related dollar buying and renewed foreign portfolio outflows.
Traders said that the Reserve Bank of India (RBI) intervened mid-session through state-run banks cushioning the pace of depreciation. However, the RBI’s interventions have provided only limited respite for the rupee which has been Asia’s worst performing currency this year. The currency is down about 3.6 per cent this year, against a gain of more than three per cent in most other emerging Asian currencies.
The decline is attributed to dollar outflows linked to gold imports by jewelry firms, foreign portfolio withdrawals, and concerns over steep US tariffs on Indian goods.
At the interbank foreign exchange, the rupee opened at 88.73 and touched an intraday low of 88.80 against the greenback, its third consecutive fall. The unit ended the session at 88.75 against the
dollar, logging a loss of 5 paise from its previous closing level. The rupee had ended one paisa lower at 88.70 against the dollar on Friday, a day after crashing 47 paise on Thursday, following the hawkish
commentary by US Federal Reserve chair Jerome Powell, even as the Fed reduced the interest rate by 25 basis points. The domestic currency has recorded its lowest-ever closing level of 88.81 against the dollar on October 14. Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, rose 0.13 per cent to 99.75.
Abhishek Goenka, founder and chief executive officer at IFA Global said, “The RBI was active through state-run banks near the 88.80 mark, cushioning the pace of depreciation and ensuring market stability. Intervention in the forward market also appears to have provided secondary support, though spot levels remain heavy amid muted capital inflows and a firm US dollar backdrop. With the rupee trading in a tight intraday range but maintaining a weak bias, near-term direction will hinge on the tone of upcoming US economic data releases and further developments in U.S. and India trade talks.”
According to Reuters, the RBI has increased its short dollar forward positions by $6 billion in September, marking the first rise in six months as it intensified efforts to curb pressure on the rupee. The RBI’s net short position in forex forwards and futures stood at $59.4 billion as of September-end signaling continued sales of dollars in the forward market. The forex forward book reflects positions in both non-deliverable forwards (NDF) and the onshore forward markets, which had peaked in February.
Globally, the US dollar index hovered near a three-month high, supported by expectations that the FED may pause further rate cuts following its latest 25-basis-point move. Investors have adopted a
more defensive positioning ahead of key US payroll and inflation prints that could influence the policy trajectory and global risk appetite. Most Asian currencies, including the Chinese yuan and Korean won, traded lower reflecting renewed safe-haven demand for the dollar.
The combination of sustained global dollar strength and ongoing domestic demand for foreign currency continues to keep the rupee on the defensive, with RBI’s calibrated interventions remaining the key stabilizing force in the near term.
