Rupee hits record low despite likely RBI intervention

The rupee fell to its weakest closing level on record on Friday, with likely intervention from the Reserve Bank of India (RBI) helping to limit the pressure from a decline in its Asian peers and persistent dollar bids from two large foreign banks.

The rupee closed at 83.6625 against the US dollar, slightly lower than its previous close of 83.65. The currency was down 0.1 per cent week-on-week.

Traders noted that the RBI likely intervened in the non-deliverable forward (NDF) market to cap depreciation in the currency, which had hit its all-time low of 83.6650 on June 20. The central bank has previously intervened in the NDF market near the time when the local over-the-counter market opens to support the rupee.

A trader at a foreign bank mentioned that while the RBI has been present in the NDF market, it does not seem keen to push the rupee higher. The trader expects the RBI to allow gradual weakness in the currency, but it is likely to be limited near the 83.70-83.75 range.

Asian currencies were mostly weaker, with the Thai baht down nearly 0.5 per cent and leading losses. The dollar index was up 0.2 per cent at 104.3, having recovered from its weakest level in four months hit earlier in the week.

The benchmark Indian equity index Nifty 50 dropped more than 1 per cent on Friday.

While a widespread IT outage impacted trading in oil, stocks, currencies, and bonds globally on Friday, volatility was largely contained in the foreign exchange markets.

Investors now await remarks from Federal Reserve policymakers later in the day and are also keeping an eye on political developments in the United States amid growing odds of a second presidential term for Donald Trump.

"Remarks about greater confidence in the US disinflation process could be mildly negative for the dollar," ING Bank said in a note.

(With Reuters inputs)