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The Indian rupee marked its record low close for a fourth straight session on Monday as the British pound’s weakness propped up the dollar index further in a risk averse environment.
The partially convertible rupee slid 0.8% to 81.6225 per dollar, having touched a new low of 81.6526 during the day, as stocks and currencies tumbled across Asia on global growth concerns.
The dollar index traded above 113-levels for the first time since 2002 as deep tax cuts in the UK sent the sterling to a record low.
The greenback has surged since the Federal Reserve sent hawkish signals last week, which forced the rupee to notch its worst weekly performance in one and a half years.
During the day, the Reserve Bank of India is suspected to have sold dollars via state-run banks around the 81.50-81.55 level to avert a larger decline in the rupee, four traders told Reuters.
The rupee, after opening at around 81.55, traded in a 21-paisa range.
“We expect the RBI to continue with significant intervention to stall rupee depreciation pressures, especially as the USD/INR pair moves towards 82 levels,” HDFC economists wrote in a note.
However, if risk-off continues on worries over recession and the Ukraine-Russia war, it could keep the dollar stronger for longer and “rupee could then see a sustained depreciation trend over the next six-eight months, despite RBI intervention,” they added.
The central bank’s foreign exchange reserves fell for a seventh straight week, down by $5.7 billion to $545.652 billion in the week to Sept. 16, RBI data on Friday showed.
Some analysts raised concerns about the pace of decline in reserves.
“We are nowhere near a crisis situation, but the pace of reserves usage is unsustainable,” said Alvin Tan, head of Asia forex strategy at RBC Capital Markets.
Another key event at the end of this week is the RBI monetary policy committee’s decision on interest rates. The rupee’s recent weakness and the Fed’s hawkish stance have raised the odds of a 50 basis point hike.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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