Rupee hits fresh low of 89.79 per dollar as NDF positions mature

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The rupee depreciated to a fresh low of 89.79 per dollar on Monday weighed down by maturing non-deliverable forward positions and a strong demand for dollars among importers.

 

The absence of a trade agreement between India and the United States continues to dampen the market sentiment.

 

The local currency regained some strength by the end of the trade, likely on the back of intervention by the Reserve Bank of India (RBI) via dollar sales, said dealers. It settled at 89.56 per dollar, against the previous close of 89.46 per dollar.

 

The rupee has depreciated by 4.56 per cent in the current financial year so far, whereas it has witnessed 4.4 per cent depreciation in the current calendar year. 

“It’s likely that the RBI stepped in at those higher levels to cool things off a bit. Several factors pushed the pair to this new peak: reports of NDF expiry-related demand, strong importer demand, and ongoing uncertainty around Indo-US trade tensions, which often makes the currency a casualty of the broader trade war narrative,” said Anindya Banerjee, head of research - Currency, Commodity and Interest Rate Derivatives.

 

“Looking ahead, the 90 level is a key psychological mark, and we’d expect the RBI to continue intervening as the rate approaches that threshold. On the downside, support lies around 88.80 to 89. We can’t confirm a top unless we see sustained trading below 88.80. If the pair breaks above 90, the next level to watch would be around 91.5 per dollar,” he added.

 

The RBI’s short dollar forward positions increased to $63 billion by October end, latest data showed. The total dollar short position stood at $59 billion by the end of September.

 

“The outlook for the rupee to remain under pressure versus the US dollar for the coming days, as the underlying imbalance between demand and supply for the US Dollar is likely to persist. In the near term, spot USDINR has resistance at 89.95 and support at 89.30,” said Dilip Parmar, senior research analyst, HDFC Securities.

 

India’s foreign exchange reserves continue to fall as the RBI steps up its defence of the rupee to prevent it from breaching the 90-per-dollar mark.

 

The total reserves fell by $4.47 billion to $688 billion in the week ended November 21, latest data by the RBI showed. Foreign currency assets decreased by $1.6 billion to $560 billion during the reported week.