The Rupee hit a new low of 85.81 per dollar in intra-day trading, driven by heightened market activity and strategic shifts by the Reserve Bank of India (RBI) position, experts say. The rupee closed at 85.54, marking its steepest single-day decline since June.
“The one-year forward premium climbed sharply to 2.34 per cent, while the cash-spot rate rose by 6.5 paise, reflecting a significant tilt in market sentiment. The surge appears rooted in the RBI’s forward positions. The central bank holds $21 billion in short-side forward contracts set to mature in December and January,” said Amit Pabari, MD at CR Forex Advisors.
“Speculation is rife that the RBI is refraining from rolling over these maturing contracts, leading to a tighter dollar supply and an oversupply of rupee. This imbalance, coupled with low dollar liquidity due to US holidays, has amplified the rupee’s momentum, pushing it to 85.8075,” he said.
As the rupee neared the 85.8075 mark, signs of central bank intervention emerged, experts say, underscoring the RBI’s commitment to curb excessive rupee depreciation. The intervention is likely aimed at managing the surge in import bill payments. The Indian currency closed at a record closing low of 85.54 on Friday.
According to Kunal Sodhani, Vice President, Global Trading Center, Shinhan Bank, the weakening of Asian currencies will put the rupee at risk too as RBI intervention may turn shallow in order to maintain export competitiveness.
“Rupee has still been one of the best currencies amongst Asian peers as the rupee has just depreciated by mere 1.70 per cent since Trump won the US election, while other currencies have depreciated by an average 2.50 per cent,” he said.
He added that FX reserves have already been depleted by $60 billion from an all-time high of $704 billion on the back of revaluation of foreign currency assets and also because of RBI intervention.
While Pabari feels the rupee is expected to trade within the 84.25 to 85.85 range in the coming week. A reversal may occur if the currency sustains below 85.25, but until then, rupee depreciation pressure is likely to persist. On the upside, the 85.85 level stands as a strong resistance, he said. Per Sodhani, 85.05 now acts as a base for Rupee while 85.85 is immediate support, followed by 86.20 level.
SHARE
Copy linkEmailFacebookTwitterTelegramLinkedInWhatsAppReddit
Published on December 27, 2024
https://www.thehindubusinessline.com/money-and-banking/rupee-hits-new-low-as-rbis-forward-strategy-stir-markets/article69034000.ece
