Indian rupee fell to its lowest closing level ever
- By Reuters -
- Aug 17, 2023
The Indian rupee (INR) fell to its lowest closing level ever against the US Dollar (USD) on Thursday as rising U.S. Treasury yields and a risk-averse environment weighed on the local currency.
The rupee ended at 83.14 against the U.S. dollar, weakening 0.24% from the previous session. The Malaysian ringgit and the Korean won led losses among Asian currencies, falling 0.5% and 0.3%, respectively.
The Indian rupee touched its life-time low of 83.29 on Oct. 20, 2022 during intra-day trade.
The Indian rupee has been under pressure since Tuesday but likely offshore dollar sales by the Reserve Bank of India have helped contain the weakness. The domestic currency market was closed on Tuesday and Wednesday for a public holiday.
The RBI also likely intervened on Thursday via public sector banks to keep the rupee from falling to a record low.
India’s benchmark equity index, BSE Sensex, was also trading in the red and was down 0.59% as of 3:30 p.m IST.
U.S. Treasury yields rose after meeting minutes from the Federal Reserve stated that most policymakers feel that inflation risks could require further interest rate hikes. The dollar index also gained following the release of the minutes.
“The rupee is likely to test the 83.30-40 levels, but it’s unlikely to breach them,” said Gaurang Somaiya, FX and rates researcher at Motilal Oswal Financial Services.
With the off-shore Chinese yuan in touching distance of its record low and the U.S. economy continuing to display resilience, pressure for the rupee is piling. The ‘higher for longer’ rates narrative hurts the local currency and weakness in the yuan is likely to weigh on it as well.
While possible intervention from the RBI seems to have shielded the rupee from further weakness, market participants will keep an eye on how long they hold.
People are hesitant to take large positions due to the possibility of an intervention by the Reserve Bank of India, a foreign exchange trader at a state-run bank said. “It’s possible RBI may intervene again close to 83.20-25 levels.”