Rupee weakens as RBI intervenes; forex reserves drop $6.7 billion

Indian unit settles at 90.64 per dollar as RBI intervenes via dollar sales; forex reserves drop $6.7 billion in week ended February 6 on decline in gold holdings

The rupee weakened on Friday weighed down by a fall in domestic equities and dampening investors’ risk appetite for the Indian unit, said dealers. The Reserve Bank of India (RBI) intervened in the foreign exchange market via dollar sales, which kept the rupee afloat amid persistent dollar demand.

 

The local currency settled at ₹90.64 per dollar, against the previous close of ₹90.59 per dollar.

 

The Indian rupee opened weaker as demand for dollars kept it well bid, but with the RBI selling the dollar at 90.75, the rupee did not cross that level, according to Anil Kumar Bhansali, head of treasury and executive director, Finrex Treasury Advisors LLP. “The mid-month demand emanated again today, along with some NDF positions, which had to be liquidated,” he said. 

The rupee has depreciated by 5.71 per cent in the current financial year so far, whereas, it has witnessed 0.84 per cent depreciation in the current calendar year. However, in February so far the domestic unit has appreciated against the greenback by 1.49 per cent.

 

The rupee continued to remain under pressure despite the US-India trade deal. The local currency was trading in the 90.60-90.75 per dollar range during the day, after opening slightly weaker, with market participants closely watching global cues.

 

“From a technical standpoint, the 90.00-90.20 band remains a key support zone. Holding above this range would keep upward momentum intact, potentially opening the door for a gradual advance toward 91.00-91.20 in the near term,” said Amit Pabari, managing director at CR Forex.

 

Market participants said that the rupee might fall to 91 per dollar, if it breaches the psychologically crucial 91.75 per dollar mark.

 

After touching an all time high in the previous week, India’s foreign exchange reserves fell by $6.7 billion in the week ended February 6 on the back of a decline in gold reserves, latest data from the RBI showed.

 

In the previous reporting week, the reserves had increased by $14 billion.

 

The total reserves stood at $717 billion at the end of the reported week. Gold reserves declined by $14 billion during the week.

 

Gold prices decreased by 0.58 per cent to $4,993/oz during the period.

 

Foreign currency assets increased by $7.6 billion during the week on the back of $10 billion buy/sell swap conducted by the RBI during the week.

 

The Special Drawing Rights (SDRs) were down by $132 million to $18.8 billion. India’s reserve position with the IMF was also down by $32 million to $4.7 billion during the same period.