The rupee closed at 83.15 per US dollar on Thursday versus 82.95 per dollar at previous close. The previous record closing low for the Indian currency was 83.02 per dollar on October 19, 2022. The rupee had hit an all-time intra-day low of 83.29 per dollar on October 20, 2022.
So far in the calendar year, the domestic currency has depreciated 0.5% versus the US dollar.
While interventions by the Reserve Bank of India (RBI) in the form of dollar sales curbed volatility in the exchange rate, analysts said the central bank was unlikely to step in beyond a point, given that global factors were driving the rupee’s depreciation.
“There is tremendous risk-aversion and a lot of it has to do with the continuous disappointment with China. This has coincided with second thoughts about what the Fed is likely to do. Comments by some of the FOMC members as well as yesterday’s minutes have added fuel to the fire,” said Abheek Barua, chief economist, HDFC Bank.
The US raised rates at a much higher rate than India did over the past 18 months, narrowing the yield differential and reducing the allure for assets denominated in rupees.
Global Move
“The RBI will certainly intervene, but I don’t think it wants to be in the business of guaranteeing levels. When all emerging markets are in trouble, trying to lean against the wind might not be a sensible strategy,” Barua said. He estimates a range of 82.50-83.25/$1 in coming weeks.
Kotak Securities’ VP for currency derivatives Anindya Banerjee said that the central bank may have sold US dollars worth around $2 billion in the spot market on Thursday.
The Chinese yuan, which typically influences other Asian currencies, has witnessed sharp volatility over the past few days after reports said that Country Garden, one of the country’s biggest property developers, had missed interest payments on bonds.