December started on a rather weak note for the rupee. The currency witnessed a rather volatile trend, ending at a record closing low of 89.5475 per US dollar on Monday, down 0.1% on the day. The currency saw significant weakness in intra-day trade to fresh all-time low of 89.7575, before recovering slightly to close at 89.54/$.
Speaking on the currency’s movement, Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities said, “Trade deal uncertainty with the US continues to keep sentiment fragile. Although officials indicate discussions are moving positively, markets now need a final, concrete agreement for the rupee to find meaningful support. Additionally, the lack of notable intervention in November has allowed the rupee to drift weaker without much resistance.”
Rupee sees RBI intervention
According to Reuters, traders said the latest decline was attributed to the maturity of the NDF market. However, the Reserve Bank of India (RBI) intervened in the market and sold dollars to prevent the rupee from breaching the key 90-per-dollar level.
The currency also touched an all-time low of 12.69 against the offshore Chinese yuan on Monday. Meanwhile, the US dollar index edged lower. The Dollar Index has been hovering around 99 level in Monday’s session
Impact of high commodity prices
The currency also saw some impact of higher commodity prices. Gold and Silver hit historic highs significantly increasing India’s import bill and weighing on the rupee. The gold rate today hovered around Rs 1,30,897/10 gm, while the silver is trading close to Rs 1,776.30/ 10 gm.
