The rupee on Monday slumped to an all-time low of 78.27 to the dollar but regained ground at the close amid reports of intervention by the RBI. At the inter-bank forex market, the domestic unit opened at 78.13 against the greenback and fell to 78.27. It later settled at 78.03, down 20 paise over its previous close of 77.83 to the dollar.

“Heavy RBI intervention is suspected, both in spot as well as forwards. Thanks to that alleged intervention, today rupee is one of the strongest currency in the world,” said Anindya Banerjee, VP of Kotak Securities Ltd.

“Till the US Fed meeting on Wednesday, there can be significant upward pressure on the rupee. Odds for a 75 bps hike is rising and that is positive for the dollar. However, we expect the RBI to cap the upside. We are looking at a range of 77.90 to 78.40 on spot over the near term,” Banerjee said.

The rupee plunged below the 78 mark and closed at a record low as the dollar strengthened on risk aversion across markets.

Yen carry trade

The Japanese yen on Monday fell to a 24-year low against the dollar, raising the prospect of higher yen carry trades in India even as companies such as Maruti benefit from sourcing cheap from Japan.

On Monday, the yen fell to a low of 135.17 against the dollar, a level not seen since October 1998.

Carry trade is a practice wherein an investor borrows in a currency such as yen to invest in higher value currencies such as the dollar.