Rupee to stay under pressure as traders eye RBI's defence of 85.80

The Indian rupee is tipped to stay under pressure on Monday with the US dollar holding near a two-year peak, while traders will keep an eye on whether the Reserve Bank of India will continue with interventions near 85.80.

The 1-month non-deliverable forward indicated that the rupee will open flat-to-slightly-lower from its closing level of 85.77 on Friday.

The currency had declined to it all-time low of 85.8075 on Dec. 27, prompting strong dollar-selling intervention by the RBI. The central bank had also stepped in last week on multiple occasions to cap the currency's decline near that level.

The rupee has faced persistent headwinds over recent weeks, including a stronger dollar and tepid capital flows alongside concerns about India's slowing economic growth.

 

"We expect the rupee to remain on a steady depreciation trajectory," said Abhishek Goenka, chief executive at FX advisory firm IFA Global. "Any retracement in USD/INR towards 85.40 can be used to hedge imports," he said.

On the day, other Asian currencies while largely rangebound while the dollar index dipped slightly to 108.8 but continued to hover close to a two-year peak hit last week.

Expectations of a hawkish Federal Reserve and anticipated policy changes under US President-elect Donald Trump have kept the dollar on the front foot, hurting emerging market currencies.

Given how strong the dollar has been "it only seems like a matter of time that it (rupee) touches 86," a trader at a large private bank said, noting that any sharp declines in the yuan will probably prompt the RBI to allow such a move.

The offshore Chinese yuan was last quoted at 7.35 against the US dollar after declining 0.8 per cent last week.