New Delhi: The rupee closed at a historic low of 84.74 per US dollar on Wednesday, December 4, driven by a depreciating trend in the currency and broad-based dollar strength, traders reported. A decline in the dollar-rupee forward premium further pressured the rupee, despite intervention efforts by the Reserve Bank of India (RBI).

The rupee weakened by five paise from its previous close of 84.69, as per data from LSEG. "There were likely payments by defence companies, and with no inflows and constant dollar buying, the currency depreciated. The RBI did intervene and the currency went up to 84.64/$1, but since there were further outflows, the RBI must have let the rupee depreciate to these levels," said Anil Bhansali, head of treasury at Finrex Treasury Advisors," said Anil Bhansali, head of treasury at Finrex Treasury Advisors, to the Economic Times.

The dollar index, which measures the greenback’s strength against a basket of currencies, rose by 0.1% to 106.5. Traders anticipate a 74% likelihood of a 25-basis-point rate cut by the US Federal Reserve in December, as per the CME FedWatch tool. Further cues on the US interest rate trajectory are expected from the non-farm payroll data, due Friday, which is a critical variable for Fed rate decisions.

While most Asian peers strengthened, including the offshore Chinese yuan, which rose by 0.2% to 7.28 after hitting a one-year low, the rupee remained under pressure. The RBI was reportedly conducting dollar-rupee buy/sell swaps in mid-to-long tenors, impacting forward premiums.

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The one-year dollar-rupee implied yield fell to a four-month low of 1.95%, a drop of nearly 30 basis points over three sessions. Analysts noted that while such swaps help shield headline foreign exchange reserves and rupee liquidity, a sharp decline in premiums complicates efforts to curb further currency depreciation.

The RBI’s monetary policy decision is scheduled for Friday, with traders expecting dovish guidance in light of a notable slowdown in India’s economy. India’s GDP growth for the July-September quarter came in weaker than expected, adding to speculation about potential policy easing.