The rupee is slipping back toward its record low of 88.80 after a brief recovery driven by central bank intervention two weeks earlier. Traders cite importer hedging, NDF expiries and a firmer dollar as drivers, with the dollar index near a three-month high on fading Fed cut bets.
Dollar Strength Keeps Rupee on Back Foot as Markets Count on RBI to Hold Line Near 88.80
A few paise from its lifetime low, the rupee waits to see if the RBI shows up
Mark
So the rupee is sitting right at the edge of its record low. Why does 88.80 matter so much?
Mimi
It's where the currency bottomed in mid-October, and where the RBI acted last time. Traders are treating it as the line the central bank is likely to hold.
Luke
Worth noting that's one trader's expectation. Bankers also said the RBI isn't defending any specific level right now.
Mark
So the line is more a market assumption than a stated policy?
Mimi
Right. The RBI has been visible through state-run banks, but nobody has confirmed a target.
Luke
And that visibility comes from traders citing it, not from any central bank statement.
Mark
What's pushing the rupee down?
Mimi
Importer hedging, NDF expiries, and a stronger dollar. The dollar index hit a near three-month high at 99.74 as December Fed cut bets cooled to about two-in-three from nearly 90%.
Luke
Those are bankers' explanations. The report doesn't say how much each factor contributes, so I wouldn't rank them.
Mark
And the foreign selling?
Mimi
On October 30, foreign investors sold a net $288.1 million of shares and $86 million of bonds. That's a single day, though.
Luke
Exactly. One day of data doesn't make a trend, and we don't know yet what happened after.
O Pulso
- Rupee seen opening at 88.74–88.78 per dollar; record low is 88.80
- RBI intervention lifted the rupee to near 87.60 about two weeks ago
- Dollar index at 99.74, a near three-month high
- Odds of a December Fed cut are about two-in-three, down from nearly 90%
- Foreign investors sold a net $288.1 million of shares on Oct 30
The rupee is slipping back toward its record low of 88.80 after a brief recovery driven by central bank intervention two weeks earlier. Traders cite importer hedging, NDF expiries and a firmer dollar as drivers, with the dollar index near a three-month high on fading Fed cut bets.
The Indian rupee faces renewed pressure as the dollar rallies and Fed rate-cut expectations fade, with markets expecting RBI intervention near the record low of 88.80.
On Monday morning in Mumbai, the Indian rupee was set to open at 88.74 to 88.78 against the dollar, according to the one-month non-deliverable forward. Friday's level was 88.7650. That leaves the currency a few paise from its lifetime low of 88.80, which it touched in mid-October.
The pressure comes from a fresh rally in the dollar. The dollar index firmed to a near three-month high of 99.74 as expectations faded that the Federal Reserve will cut rates in December. Market pricing now implies roughly a two-in-three chance of a cut next month. Before remarks by Fed Chair Powell, it stood at nearly 90%.
The rupee is back near its weakest after a short reprieve. About two weeks ago, heavy intervention by the Reserve Bank of India helped it rally to near 87.60. That recovery has now been given back. Bankers pointed to three drivers of the renewed weakness: persistent hedging by importers, expiries of non-deliverable forwards, and the stronger dollar.
The central bank has been active in this latest leg down, with traders citing its presence through state-run banks. But bankers said the RBI does not appear to be defending any specific level. That has left the market guessing at where it might act.
One trader at a private bank said he expects the RBI to step in around 88.80. That is where it acted last time, he said, and staying away now could risk a large move higher in dollar/rupee.
Other indicators on Monday were mixed. The one-month non-deliverable rupee forward was at 88.84/88.90, and the onshore one-month forward premium stood at 13.25 paise. Brent crude futures rose 0.5% to $65.1 per barrel. The ten-year U.S. Treasury yield was at 4.08%.
Foreign investors were net sellers on October 30, according to NSDL data. They sold a net $288.1 million of Indian shares and a net $86 million of Indian bonds.
The question now is whether the RBI shows up at 88.80 as traders expect, or lets the rupee through to a new record low.
Citações Notáveis
I would expect the RBI to step in around 88.80. That's where they acted last time, and staying away now could risk a large move higher.— Trader at a private bank
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Leia o original em Reuters ↗
Economy & Finance