The rupee on Thursday hit a record intra-day low but ended on a flat note against the dollar due to suspected intervention from the Reserve Bank of India (RBI).
At the inter-bank forex markets, the local unit opened at 85.95 which is an historic intra-day low but clawed back due to dollar sales from state run banks. It finally settled sideways at 85.85 to the greenback. Forex circles said that the recovery suggests that the RBI could be defending the 86 levels at least for now.
The rupee has been under pressure because of the global dollar strength which has only increased due to the US Federal Reserve slowing down its interest rate cuts this year and Donald Trump’s policies.
This has resulted in global investors taking the money off from riskier assets such as emerging market stocks and putting it in US shares, its treasuries or the dollar.
Experts added that the continued weakness in the stock markets also hit the rupee.
Anuj Choudhary, research analyst at Mirae Asset Sharekhan, said the surge in US bond yields and FPI outflows pressured the rupee.
“We expect the rupee to trade with a negative bias on weak domestic markets, strong dollar and rising US treasury yields.
“Elevated crude oil prices and FPI outflows also put downside pressure on the domestic currency.
However, any RBI intervention may support rupee at lower levels. Investors may watch out for non-farm payrolls report. USD-INR spot price is expected to trade in a range of ₹85.75 to ₹86.10,” Choudhary added.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading at 108.08 against its last close of 109.09.
Similarly, yields on the 10-year US treasury was hovering at 4.65 per cent compared with its previous finish of 4.69 per cent.
Provisional data from the stock exchanges showed foreign portfolio investors (FPIs) selling stocks worth ₹7,170 crore on Thursday, consequently, the 30-share Sensex fell sharply 528.28 points, to end at 77620.21 points.
“The overall trend remains weak, and a breach below 23,496 could accelerate selling pressure, potentially pushing the index toward the next support at 23,263,’’ Devarsh Vakil, Head — prime research, HDFC Securities, said.