(Nov 21): The Indian rupee hit a fresh all-time low against the dollar, as traders said the Reserve Bank of India stepped away from selling the greenback to firmly support the currency.
The currency fell as much as 0.9% to 89.4788 per dollar on Friday, weakening past the previous record low of 88.8050 hit in September. The rupee’s one-month offshore rate fell as much as 1% to 89.74.
“The RBI seems to have stepped away from the market amid a building wave of dollar demand,” said Dhiraj Nim, currency strategist at Australia and New Zealand Bank Ltd. “There is uncertainty over when the trade deal will arrive and as such the RBI may not want to keep defending a level and using reserves.”
The slump comes a day after governor Sanjay Malhotra said that pressure on the rupee would ease once the country clinches a “good” trade deal with the US.
“People had been expecting that RBI will protect the 89 level but this time it was missing,” said Dilip Parmar, FX analyst at HDFC Securities. Friday’s tumble “shows there was real panic in the market”, he added.
A spokesperson for the central bank did not immediately respond to an email seeking comment on the matter.
See also: Rupee gains as RBI returns to defend currency after slump
The central bank has been selling US dollars consistently in recent weeks to prevent excessive volatility and to keep the rupee from breaching past its prior record low. Its aggressive interventions in mid-October had spurred short-term gains in the currency.
Delays in finalising a trade deal are dampening sentiment, even after India recently suggested an accord was close. The US currently levies the highest tariffs on India among Asian nations. Meanwhile, improving US-China trade relations are eroding India’s relative advantage, according to Emkay Global Financial Services.
The rupee is Asia’s worst-performing currency this year, down 4.3% versus the dollar. For now, ANZ’s Nim sees the rupee stabilising around 89.40.
Uploaded by Magessan Varatharaja
