 "Rupee dollar")
The Indian rupee on Wednesday settled at a record closing low of 83.4 against the US dollar due to continuous demand from importers for the greenback ahead of the US Federal Reserve (Fed) meeting, according to market participants.
The Indian currency had settled at Rs 83.39 a dollar on Tuesday. The local currency had witnessed a record low of Rs 83.48 (intraday) against the dollar on November 10.
The dollar index, which measures the strength of the greenback against a basket of six major currencies, rose to 103.95, against 103.78 on Tuesday.
Market participants speculated that the Reserve Bank of India’s (RBI’s) intervention in the foreign exchange market safeguarded the rupee from further depreciation.
“The rupee depreciated because of the Fed policy on Wednesday,” said Anindya Banerjee, vice-president (V-P)-currency derivatives and interest rate derivatives at Kotak Securities.
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“The RBI was there in the market; it could have sold $100-200 billion,” he added.
The local currency is expected to depreciate further in December as the demand for the dollar is speculated to continue.
“Foreign institutional Investors appeared as buyers, while domestic institutional investors were sellers, contributing to the rupee’s sideways movement. A break on the lower side is more likely, with support around 83.5. A strong close above may signal a weak momentum toward the 83.9-84.2 zones. The upcoming Fed’s policy is expected to keep rates stable, but market focus will be on the commentary for potential currency impacts,” said Jateen Trivedi, V-P (research), LKP Securities.
In the current financial year (2023-24), the rupee has depreciated by 1.5 per cent, whereas, in the current calendar year, it has depreciated by 0.8 per cent so far. However, it had appreciated by 0.16 per cent in the first six months of the current calendar year on the back of robust foreign inflows.
Meanwhile, the rupee has displayed remarkable stability against the dollar in the current calendar year, marking the least volatility witnessed in over two decades. The local currency experienced a marginal depreciation of 0.78 per cent against the greenback.
The last time the Indian unit exhibited such stability was in the year 2002 when it appreciated by 0.56 per cent.
While emerging market currencies regained their ground against the dollar in November, the Indian rupee lagged behind its peers, primarily due to persistent demand for the dollar among importers.
In November, the rupee depreciated by 0.2 per cent, even though the dollar index fell by around 4 per cent in the same period. Consequently, the rupee emerged as the worst-performing currency among its Asian peers during the month, being the sole currency to depreciate while other currencies appreciated.
