The rupee on Monday closed at a record low against the dollar amid worries over the victory of Donald Trump in the US presidential elections and persistent outflows from foreign portfolio investors (FPIs).
However, suspected intervention from the Reserve Bank of India (RBI) restricted its losses.
At the inter-bank forex market, the domestic currency settled at 84.39 against the US dollar. On Friday, the rupee had closed at 84.38.
The rupee has been under pressure as Trump’s policies is seen as positive for the dollar. This has also resulted in other Asian currencies feeling the heat.
Consequently, the Dollar Index (DXY), which gauges the dollar’s strength against a basket of six currencies, has gained.
It was trading at 105.58 on Monday a rise of 0.56 per cent over the previous close.
So far in this calendar year, the DXY has risen over 4.20 per cent.
FPI sales in the equity markets are another factor that has resulted in the rupee coming under pressure.
Provisional data from the stock exchanges showed them selling stocks worth ₹2,306 crore on Monday. So far in November, their net sales stand at nearly $2.80 billion. This comes after they offloaded stocks worth $11.19 billion last month.
Experts said that pressure on the rupee will ease after FPI sales ebb. Stock market circles said there has been a moderation in the extent of their sales which could ease the headwinds against equities.
“The Reserve Bank’s intervention may support the domestic currency. Moreover, traders look forward to India and the US CPI inflation data scheduled to be released this week,” Praveen Singh of Sharekhan by BNP Paribas said.
He said the domestic currency is expected to trade with a bearish tilt in the near future.
One key factor that has seen the rupee maintain its ground compared with other emerging market currencies has been the tight hold of the RBI.
The central bank has over the past few weeks intervened in the markets (selling dollars) via state run banks.
Though the exact numbers of its intervention in the spot markets are not available, its actions in protecting the rupee has resulted in a decline of India’s forex reserves.
