The rupee hit a fresh low of 83.29 against the US dollar on Wednesday due to the rise in the dollar index. This comes ahead of the US Federal Reserve’s outcome scheduled after market hours, traders said. Additionally, geopolitical tensions in West Asia and rising oil prices led to foreign outflows, which further weighed on the local currency.
The previous all-time closing low for the rupee was 83.28 on October 16. The Indian currency settled at 83.26 percent on Tuesday.
The dollar index, which measures the greenback’s strength against a basket of six major currencies, rose to 106.87 on Wednesday from 106.02 on Tuesday.
Market participants speculated that the Reserve Bank of India (RBI) intervened in the currency market to protect the rupee from further weakening.
“The RBI has been in the market, and they are present every day,” said Anindya Banerjee, vice president – Currency Derivatives and Interest Rate Derivatives at Kotak Securities. “They could sell about $50 million,” Banerjee said.
The local currency depreciated by 0.3 percent in October. It depreciated by 1.2 percent between July and September.
In the current financial year, the rupee has depreciated by 1.33 percent, while in the current calendar year it has depreciated by 0.66 percent so far.
On the other hand, it witnessed a 0.2 percent appreciation in the first quarter. Moreover, it appreciated by 0.16 percent in the first six months of the current calendar year due to robust foreign inflows.
Traders expect the 83.60 dollar mark to be the next stop if the rupee breaks the 83.30 mark.
“The RBI is facing a touchy situation as its foreign exchange reserves fell to $583.53 billion at the end of October 20, while it intervened in the market to prevent the rupee from falling below 83.29, its lowest level. The rupee is plagued by dollar outflows from foreign portfolio investors (FPIs), oil companies, importers and ECB redemptions,” said Anil Kumar Bhansali, Head of Treasury and managing director at Finrex Treasury Advisors LLP.
