Rupee Hits Record Low Despite RBI Intervention

New Delhi: The rupee fell to an all-time low on Monday, December 6, pressured by a robust US dollar and weak capital inflows amid concerns over slowing economic growth. The currency slid to 85.84 against the US dollar, marginally surpassing its previous record low of 85.8075 reached in late December.

The rupee ended the trading session at 85.8275, marking a 0.1% decline for the day. Persistent dollar demand and bearish sentiment around the rupee kept it under pressure, despite intervention by the Reserve Bank of India (RBI), which helped prevent further losses, according to a Reuters report.

“It seems like the RBI will hold it (USD/INR) below 86 before (Donald) Trump’s inauguration later in January,” a trader from a foreign bank told Reuters.

Globally, the dollar index eased 0.3% to 108.5, retreating from a two-year high. However, the slight dip in the dollar index provided little relief for the rupee, as strong dollar bids in the local spot market and the non-deliverable forward (NDF) market continued to weigh heavily.

The spot market is where financial instruments such as commodities, currencies and securities are traded for immediate delivery. NDF, on the other hand, is a two-party currency derivatives contract to exchange cash flows between the NDF and prevailing spot rates.

Also read: Amid Pressure From Yuan Decline and Dollar Rally, Rupee Closes at Record Low of 85.77: Report

“The proximity to Trump’s inauguration and the strong underlying narrative of a hawkish Fed may well keep any USD correction short-lived,” ING Bank noted in a research update. The bank maintained its target of 110 for the dollar index in the coming weeks.

The rupee’s decline was further exacerbated by dollar demand from foreign banks, reportedly acting on behalf of custodial clients.

Equity markets mirrored the currency’s struggles, with the benchmark BSE Sensex and Nifty 50 indices closing down 1.6% each. Foreign investors have offloaded $1.1 billion worth of Indian stocks and bonds on a net basis so far this month, as per stock depository data.