3 hrs ago
Rupee Hits Two-Month Low as RBI Sells Dollars
The Indian rupee lost value against the US dollar on Tuesday.
It briefly fell to 96.45 rupees for one dollar and ended the day at 96.42.
People selling Indian shares and businesses seeking dollars added pressure.
The Reserve Bank of India reportedly sold dollars through state-run banks to slow the rupee’s fall.
Analysts said a possible interest-rate increase could help, but it might not be enough by itself.
They also said the central bank’s guidance and further action could matter.
The dollar remained strong, while oil prices eased from their daily high.
The rupee was nearing its record low from May.
The rupee fell to 96.45 per dollar intraday and closed at 96.42, down 13 paise from its previous close.
Market participants said the Reserve Bank of India sold dollars through state-run banks around 96.30–96.40 to moderate the fall.
Pressure came from foreign investor outflows, elevated oil prices, importer dollar demand, high global bond yields and pre-policy positioning.
Analysts said an expected 25-basis-point repo rate hike may support the rupee, but much of the move was already priced in.
The dollar index stood near 102, while Brent crude fell to about $97.93 a barrel after reaching an intraday high of $100.99.
- Who
- The Indian rupee, with the Reserve Bank of India reportedly intervening through state-run banks.
- What
- The rupee fell to a more-than-two-month low against the US dollar.
- Where
- The interbank foreign exchange market in India.
- When
- Tuesday, ahead of the monetary policy announcement expected the following day.
- Why
- Foreign investor outflows, oil prices, importer demand for dollars, high global bond yields and pre-policy positioning weighed on the rupee.
Potential support
Continuing pressure
Possible policy support
Potential support
A widely expected 25-basis-point repo rate hike could support the rupee; a hawkish stance, continued intervention and liquidity management could have a stronger stabilising effect.
Continuing pressure
The expected rate hike was largely priced in and might not, by itself, reverse the rupee’s weakening trend.
Near-term currency outlook
Potential support
Sustained RBI intervention and improvement in oil prices or global risk sentiment could provide near-term relief.
Continuing pressure
Strong dollar demand, importer hedging and stop-loss demand could keep pressure on the rupee; the 96.50–96.70 area was identified as immediate resistance.
Key facts
- Intraday low
- 96.45 rupees per dollar
- Closing rate
- 96.42 rupees per dollar
- Previous close
- 96.29 rupees per dollar
- Reported RBI dollar sales
- Around 96.30–96.40 per dollar, through state-run banks
- Expected rate decision
- A 25-basis-point repo rate hike was widely expected for the following day
- Dollar Index
- Around 102, after an intraday high of 102.30
- Brent crude
- About $97.93 per barrel, after an intraday high of $100.99
- Record low cited
- 96.96 per dollar, touched in May
Quotes
Kunal Sodhani
Head of treasury at Shinhan Bank
“The RBI is largely expected to hike the repo rate tomorrow by 25 basis points which would be positive for the rupee but by itself may not be sufficient to reverse the trend (of rupee falling) as the move is largely priced in.”
deccanchronicle.com
Sources
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