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The Indian rupee hit a new closing low of 83.35 against the US dollar on Monday, despite a fall in the dollar index. Dealers noted that banks purchased dollars on behalf of oil companies and other importers. The Indian currency had settled at 83.27 on Friday.
The previous all-time closing low for the rupee was 83.34 per dollar on November 10. On the same day, the rupee had reached a record low of Rs 83.48 intraday against the dollar.
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The dollar index, measuring the greenback’s strength against a basket of six major currencies, fell to 103.57 from 104.16 on Friday. The dollar weakened as markets anticipated that US interest rates might have peaked, closely watching for signs of the US Federal Reserve (Fed) easing monetary conditions.
“There was demand for the dollar from importers,” said Amit Pabari, managing director at CR Forex. “The Reserve Bank of India was absent from the market on Monday,” he added.
The local currency is expected to trade in the range of Rs 83.1 to Rs 83.45 per dollar in the current week.
In November, the Indian unit has depreciated by 0.1 per cent.
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In the current financial year (2023-24), the rupee has depreciated by 1.4 per cent, while in the current calendar year, it has depreciated by 0.7 per cent so far. However, it had appreciated by 0.16 per cent in the first six months of the current calendar year due to robust foreign inflows.
Meanwhile, the yield on the benchmark 10-year government bond rose by 4 basis points (bps) to settle at 7.26 per cent on Monday as mutual funds (MFs) sold bonds at a profit, according to dealers.
“There was selling by MFs as they were booking profit,” a dealer at a primary dealership said.
The 10-year benchmark yield settled at 7.22 per cent on Friday.
“There was some profit booking, and another thing is inflationary fears. Crude oil rose to almost $82 per barrel. Traders would have considered that,” said Dwijendra Srivastava, executive vice-president and chief investment officer of debt at Sundaram Asset Management Company.
Brent crude futures, the global oil benchmark, rose by 0.7 per cent to $81.14 per barrel, attributed to Saudi Arabia, the world’s largest oil exporter, planning to extend oil production cuts into the next year.
Additionally, the Organization of the Petroleum Exporting Countries+ is contemplating further cuts in response to decreasing prices and escalating tensions related to the Israel-Hamas conflict.
The market is eagerly awaiting the release of the minutes of the Fed meeting scheduled for Wednesday. However, the market believes that the US rate-setting panel might be done with rate hikes given the recent favourable economic data.
According to the CME FedWatch Tool, 99.8 per cent of traders expect the Fed to keep rates unchanged in December, while the remaining traders expect a 25-bp hike.
