India’s RBI is back defending rupee as October gains fizzle
THE Indian rupee is inching closer to a new low again, with the central bank’s recent interventions providing only a limited respite for Asia’s worst-performing currency this year.
Uncertainty over tariffs on India’s exports to the US and a less certain path for Federal Reserve rate cuts are exerting pressure on the rupee, which fell for a third straight session on Monday (Nov 3) to 88.7988 against the US dollar. The currency has failed to hold on to its gains after the Reserve Bank of India (RBI) unexpectedly sold large amounts of US dollars last month to quell speculation against the rupee.
The monetary authority has been selling small amounts of US dollars over the past few days, keeping the rupee from breaking past its record low of 88.8050 per US dollar, traders familiar with the transactions said, asking not to be identified as they aren’t authorised to speak publicly. The intervention is relatively smaller in nature compared with the large US dollar sales seen last month, they said.
Irrespective of RBI’s intervention, the rupee is facing more depreciation pressure, said Sakshi Gupta, senior economist at HDFC Bank. “The short dollar story has kind of run its course.”
The rupee managed to hold steady in October after five successive months of losses, largely due to the RBI’s hand. The currency is down about 3.6 per cent this year, against a gain of more than 3 per cent in most other emerging Asian peers.
The RBI doesn’t target any level or price band for the rupee, RBI Governor Sanjay Malhotra said recently.
“The RBI may not let the 89 level break significantly unless there are other economic fundamentals that start working against India and the rupee,” said Dhiraj Nim, currency strategist at Australia and New Zealand Banking Group.
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