Rupee settles at new closing low of 88.80 amid FPI outflows, RBI intervenes

The rupee settled at a new low of 88.80 per dollar on Wednesday, as it continued to face depreciating pressure amid foreign outflows and strong demand for the greenback, said dealers.

 

The local currency settled 2 paisa lower against the previous close of 88.78 per dollar. It has depreciated by 3.74 per cent so far in the current financial year, whereas, it has witnessed 3.54 per cent depreciation in the current calendar year.

 

While the rupee has been hovering near record low for the past week, the volatility remains low on likely intervention by the Reserve Bank of India (RBI), said dealers.

 

 

“There is very limited movement because PSU banks have been selling dollar for the RBI,” said a dealer at a state-owned bank. “The outflows and demand for dollar from importers is putting pressure,” he added.

 

The rupee has remained, in the current month so far, with zero movement.

 

“IFA Global Hedging barometer unchanged at 130 is indicating a moderately bearish outlook on rupee over the medium term (implied range 88.40-89.40 over next six weeks). Barometer range is 36-180 with 36 indicating peak USDINR bearishness,” said Abhishek Goenka, founder & CEO of IFA Global.

 

The dollar index was trading 0.5 per cent higher near 99 at 98.98. It measures the strength of the greenback against a basket of six major currencies.

 

Market participants said that the US market shutdown prompted profit- booking in equities, while FPIs remained consistent sellers, leading to steady dollar buying. The dollar’s strength continues to be underpinned by safe-haven demand amid US fiscal uncertainty and heightened geopolitical tensions.

 

However, the market now eyes when the central bank might allow the exchange rate to drift towards 89 and beyond, said dealers.

 

Meanwhile, the real effective exchange rate (REER) remains below its long-term average, indicating limited downside for the rupee. Market participants are closely tracking developments around US fiscal policy, US-India trade talks, RBI’s policy stance, and FPI flows for cues on the next movement in rupee.