The Indian rupee depreciated to a fresh record low on Friday, amid strong dollar demand in the non-deliverable forwards (NDF) market. The rupee dropped 0.6% to a fresh record low of 85.7437 per dollar, registering its steepest single-day fall since February 2023, according to Bloomberg.
The local currency extended the fall for a ninth straight session and has weakened by 3% against the US dollar so far this year. Rupee is set to post annual losses for the seventh year in a row.
The dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading a tad higher at 108.1 amid soaring US Treasury yields with 10-year bonds hovering around 4.50%. Other Asian currencies were down between 0.1% and 1%.
The greenback has gained over 2% so far this month and is on course for its third monthly gain on the trot, Reuters reported. Broad strength in the dollar, concerns over widening trade deficit and slower local growth have exerted pressure on the rupee.
“The pressure on the currency is likely to persist, driven by month-end dollar demand from local oil companies. Thus, we anticipate the USDINR pair to trade within the range of 85.00 to 85.50 in the near term,” said Amit Pabari, Managing Director at CR Forex.
The latest RBI bulletin shows that the central bank continues to actively intervene in the forex market to stabilize the currency. In October alone, the RBI purchased $27.5 billion while selling $36.78 billion, resulting in a net sale of $9.28 billion in the spot foreign exchange market.
“Despite such aggressive measures, the Rupee has depreciated from 84 to 85 levels within just two months—a sharp contrast to the 14 months it previously took to weaken from 83 to 84. This underscores the Rupee’s heightened sensitivity to external factors over domestic influences,” Pabari said.
Meanwhile, the Dollar Index remains firm above the 108 mark in the holiday-shortened week, bolstered by stronger-than-expected Initial Jobless Claims data.
In the near term, Pabari expects the Dollar Index to remain elevated, with immediate support at the 107 level. A break below this could trigger further correction towards the 105.50 mark, he said.
(With inputs from Agencies)
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