The rupee neared 72 a dollar level on Thursday, but pushed back after an intervention by the Reserve Bank of India (RBI), as the US Federal Reserve minutes indicated that rate cuts could be delayed.
The Chinese yuan, too, fell to an 11-year low, responding to the US-imposed tariffs on imports. But the rupee directly followed equities, which fell sharply on Thursday.
The partially convertible currency closed at 71.81 a dollar, a level last seen on December 14, 2018. In the intra-day trade, however, the rupee touched 71.98 a dollar. The local currency had closed at 71.55 a dollar on Wednesday.
“The rupee went close to the psychological level of 72, but it is apparent that the RBI is keeping a close watch and has enough ammunition to arrest any undue volatility,” said Paresh Nayar, head-FX and Fixed Income, FirstRand Bank.
According to Samir Lodha, managing director of QuantArt Market, the RBI intervened in the market “and will possibly continue to do so for a couple of days at least.”
Lodha sees the rupee to trade around 72.50 before stabilising.
“The next technical resistance level is 72.40-50 a dollar for the rupee,” Nayar said.
Most emerging markets' currencies fell against the dollar. In Asia, the Korean won fell about 0.41 per cent, while the rupee fell 0.37 per cent.
Among major currencies, the euro fell on weak private sector data, while the Japanese yen gained 0.06 per cent against the dollar.
The dollar index, which measures the greenback’s strength against major global currencies, rose 0.04 per cent to 98.33.
The minutes of the US Federal Open Market Committee (FOMC) report was hawkish.
“Most members thought of the cut as an insurance cut or a mid-cycle policy adjustment rather than the beginning of a new rate cut cycle,” said IFA Global in a note.
“Fed's stance is key to stability for EM currencies including India,” said Lodha.
“Going forward, the movement in the local equity markets and emerging market currencies will be key for the rupee,” said Rahul Gupta, currency research head at Emkay Global Financial Services Ltd.