The Indian rupee hit another fresh record low at 90.42 during intra-day on Thursday. However, it retraced to 89.98 at the closing due to likely intervention from the Reserve Bank of India (RBI).
On Wednesday, the domestic currency breached 90 for the first time amid constant pressure on account of delayed trade deal.
What did Kunal Sodhani say?
“The rupee opened lower and again tested a new record low. However, mild intervention from the RBI was observed at several levels particularly around 90.40 and 90.18 levels, supporting the rupee,” Kunal Sodhani, head of treasury, Shinhan Bank.
Some dealers said that inflows, probably from initial public offer (IPOs), may have supported the rupee during the day. Though the currency pared some losses on Thursday, traders expect the rupee to trade below 90 in the absence of a trade deal and the RBI intervention.
Multiple factors are weighing on the currency currently. The delayed India-US trade deal, limited RBI intervention, and ongoing foreign outflows have kept market sentiment weak and the currency under pressure.
Rupee fares worst among Asian peers
The rupee continues to remain the worst performing currency among its Asian peers. So far in the financial year, the currency has fallen 5.3%.
According to Anindya Banerjee, head of currency and commodity research at Kotak Securities, the rupee will likely trade in the range of 89.50-90.50 in the near-term. He further said that the sharp decline of rupee is not a concern at this point.
“If there were serious worries, intervention from the RBI would be more aggressive. With low inflation and strong support for exporters, a 5% depreciation is manageable,” Banerjee said.
Market participants now look forward for comments regarding the sharp fall of rupee from the RBI’s policy decision on Friday. If the RBI cut rates, it will likely put further pressure on the currency. However, market participants expect that if a cut happens, the RBI will aggressively supply dollars to the system.
