Going downhill: Rupee hits new low on importer demand, corporate outflows

Some market participants said that the RBI intervened in the foreign exchange market by dollar sales during the last hour of trade, which reversed some losses

The rupee plunged to a new low of 83.65 against the US dollar on Thursday, driven by corporate outflows and robust demand from local importers, dealers said.

During the day, the local currency hit a record intra-day low of 83.67 against the greenback.

The rupee had previously hit an intraday low of 83.58 per dollar on April 19. The Indian currency settled at 83.46 against the dollar on Wednesday.

Market participants said the Reserve Bank of India (RBI) intervened in the foreign exchange market, propped up by dollar sales during the last hour of the trade, which reversed some losses.

“The RBI was not there initially, but they intervened at 83.62 per dollar,” said a dealer at a state-owned bank.

“For the next two to three weeks, the RBI will protect the rupee at 83.70 per dollar,” he added.

Market participants said the absence of an intervention by the central bank in the early trade contributed to a sharp depreciation of the rupee.

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The weakening Chinese yuan and the strengthening of the greenback further weighed on the Indian unit.

“The rupee, which was range-bound weakened to 83.67 per dollar as the RBI left the currency pair and allowed the dollar to strengthen. The reasons for the same were general dollar strength, weakness of the Chinese yuan, equity-related outflows, and oil buying by oil companies,” said Anil Kumar Bhansali, head of treasury and executive director at Finrex Treasury Advisors LLP.

“It looks like that RBI has allowed the weakness after the elections as it broke ~83.60 per dollar and closed above it,” he added.

In the current financial year, the rupee has depreciated by 0.3 per cent, and in the current calendar year it declined by 0.5 per cent.

In June, the local currency has depreciated by 0.2 per cent so far.

Foreign portfolio investors and oil importers were the constant buyers of the greenback after the rise in crude oil prices, said dealers.

The Houthis released a video showcasing a recent attack on a cargo ship in the Red Sea.

The footage revealed a series of successive strikes by the Houthis, culminating in massive explosions.

Traders also speculated around $1.7 billion outflows from Vodafone's Indus Tower stake put further pressure on the rupee.

The rupee is expected to remain under pressure in the near term and regain ground against the American currency on the back of inflows in the debt segment after the JP Morgan bond index inclusion is scheduled to begin June 28.

The Indian unit is expected to trade in a range of 83.35 to 83.90 per dollar, market participants added.