The Indian rupee continued to remain under pressure on Friday due to heightened demand from importers and corporates, along with a firmer dollar index. The currency closed at a record low of 91.99, almost flat from the previous close. During the day, the rupee traded in the range of 91.84-91.99.
Dealers noted that RBI‘s intervention prevented the rupee from breaching 92 and held it within a range. That said, Friday’s action was milder than that of the previous day, they added. The currency breached 92 for the first time on Thursday.
In the current financial year, the rupee has fallen 7.6%. In just one month, the currency has declined 2.35%. The dollar index, which pressured the currency on Friday, climbed 0.4% to 96.67 during the day.
Foreign Capital Outflows
“The Indian rupee closed at a record low amid risk aversion and a stronger greenback. The sentiment remains weak amid foreign fund selling. The dollar supply from the central bank is unable to provide needed support amid strong dollar demand from the corporates,” said Dilip Parmer, research analyst, HDFC Securities.
He added that the rupee has support at 91.50 and resistance at 92.10 in the near-term. “The bias for the rupee remains bearish as long as it trades below 91.20.”
Future Depreciation Outlook
A dealer at a state-owned bank said that the RBI will continue to step in to curb excess volatility, but will allow orderly depreciation ahead. He expects the rupee to cross 92 again in the next few days and to trade in the range of 91-93 for the rest of the financial year.
Currency analysts and traders said that currency will continue to be under strain and appreciation can only occur if foreign inflows come back. Foreign investors offloaded equities worth $ 3.2 billion in January.
Traders will closely monitor the Budget, which is scheduled on Sunday, for any reforms boosting foreign capital inflows into markets, which could support the currency.