New Delhi: For a consecutive ninth day in a row, the Indian rupee on Friday hit a record lifetime intra-day low of 85.80 before a possibly central bank’s intervention that helped recover some of its losses and settled 23 paise lower at a record low of 85.50 (provisional) against the US dollar, weighing down a strong month-end demand for dollar. For the year so far, the rupee has weakened by about 3 percent against the US dollar, and is set to post annual losses for the seventh year in a row. At this pace, the rupee is poised to post its worst month in two years.
However, experts and analysts are of view that the local currency depreciated sharply after the strong demand amid expiry of December currency futures and month-end demand from importers. “Strong dollar demand in the non-deliverable forwards (NDF) market also put pressure on the rupee. Besides, dollar liquidity in the market remains very low, amplifying the upward momentum in the pair,” experts said.
It has been observed that for the year so far, the rupee has weakened by 3 percent against the US dollar. “Rupee fell to its all time low on the back of dollar buying related to the expiry of the December currency futures contract and maturing NDF positions as well as month end dollar demand,” said Anil Kumar Bhansali, head of treasury and executive director Finrex Treasury Advisors LLP.
The analysts, however, said that the Reserve Bank of India's (RBI’S) stance to hold on to its dollar payments in short-term forward contracts added to the shortage of greenback, with importers rushing to meet their month-end payment obligations. “Despite robust sentiment in domestic equity markets, the rupee was weighed down by sustained outflow of foreign funds and rising crude oil prices,” they added.
At the interbank foreign exchange, the rupee opened weak at 85.31 and plunged 53 paise to the lowest-ever intraday level of 85.80. The unit finally ended the session at 85.50 (provisional) against the greenback, losing 23 paise from its previous closing level of 85.27. The rupee's earlier sharpest one-day fall of 68 paise was recorded on February 2, 2023.
The domestic unit has been hitting new lows almost every day in the past couple of weeks. It had plunged 12 paise to 85.27 against the dollar on Thursday after declining 13 paise in the previous two sessions. “The central bank holds $21 billion in short-side forward contracts set to mature in December and January. Market speculation suggests that the RBI has refrained from rolling over these maturing forwards, leading to a scarcity of dollars and an oversupply of rupees.
“The rupee hit a record low on dollar demand from importers towards the end of the month and outflows from foreign investors (FIIs). Rising US treasury yields and crude oil prices also weighed on the rupee,” said Anuj Choudhary, research analyst at Mirae Asset Sharekhan, projecting that the USD-INR spot price in a range of Rs 85.30 to Rs 85.85, saying traders may take cues from goods trade balance data from the US.
Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading higher by 0.04 per cent at 107.94, while the 10-year benchmark US Treasury yield rose 0.76 per cent, hitting its seven-month high level of 4.61 per cent.
Brent crude, the global oil benchmark, rose 0.15 per cent to $73.37 per barrel in futures trade. In the domestic equity market, the 30-share BSE Sensex settled 226.59 points or 0.29 per cent higher at 78,699.07 points, while Nifty went up 63.20 points, or 0.27 per cent to close at 23,813.40 points. “The FIIs were net sellers in the capital markets on Thursday, as they offloaded shares worth Rs 2,376.67 crore,” the exchange data showed.
