The Indian rupee dropped to a record low versus the US dollar on Thursday, as Asian currencies declined on concerns over the pace and quantum of US Federal Reserve’s policy tightening ahead.
The rupee closed at a record low of 80.86 to the dollar, down from 79.9750 in the previous session.
It was the biggest single-day fall for the local unit since Feb. 24.
Traders that Reuters spoke to, were unable to confirm whether the Reserve Bank of India intervened in the spot market during the session.
Some traders said the RBI may have stepped in to arrest the rupee’s decline, but the intervention was not too aggressive.
However, most traders Reuters spoke to could not confirm if the central bank intervened in the spot market during the session. Traders at two state-run banks denied that RBI sold dollars to rein-in the rupee’s fall.
All through the session, the rupee remained under pressure after the Fed sprung a hawkish outlook.
While the Fed’s 75 basis-point rate hike was on expected lines, financial markets were surprised by the hawkish so-called dot plot.
The dot plot indicated that the rates will reach 4.4% by the end of this year, which would mean a cumulative increase of 125 basis points over the remaining two meetings in November and December.
Further, policymakers see rates rising to 4.6% by end-2023.
On the back of these forecasts, Asian currencies plunged and equities declined.
“Given the current pro-dollar and weak equity sentiment, we expect RBI to… focus on smoothening the move towards 81 over the next few sessions,” said Gautam Kumar, head of financial products at Kristal.AI, a Singapore-based digital private wealth management platform.
“We think USD/INR will just shift to trade in a higher 80-82 range over the medium term.”
The dollar index at one point reached a fresh 20-year high of 111.80, but came off as the Japanese yen jumped after authorities intervened in the foreign exchange market for the first time since 1998. read more