The Indian rupee hit a record low against the US dollar, plummeting to its all-time low due to strong dollar bids and RBI intervention. Will this decline continue to affect the currency market?
Rupee Hits Record Low Amid Strong Dollar Bids
The Indian rupee weakened to its all-time low due to strong dollar bids spurred by the maturity of positions in the non-deliverable forwards (NDF) market. The currency hit a record low of 86.6475 before closing at 86.63 against the US dollar, down from its close at 86.5750 in the previous session.
RBI Intervention Helps Cap Losses
State-run banks were spotted offering dollars, most likely on behalf of the Reserve Bank of India (RBI), while foreign banks’ dollar offers also helped limit the rupee’s decline, traders said. The RBI’s intervention has raised speculation that it has loosened its grip on the INR.
Global Headwinds and Market Volatility
India’s central bank intends to be judicious in its use of foreign exchange reserves to mitigate domestic currency market volatility amid strong global headwinds. The dollar index was last quoted at 109.5, having cooled off its two-year peak, which helped most Asian currencies nudge higher.
Market Expectations and Upcoming Data
Investors now await the release of US wholesale and consumer price inflation data due on Tuesday and Wednesday, respectively. The rupee’s 1-month implied volatility rose to a 16-month peak of 4% on the day, indicating increased market uncertainty.
Key Takeaways
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The Indian rupee hit a record low against the US dollar.
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Strong dollar bids and RBI intervention contributed to the decline.
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Global headwinds and market volatility are affecting the currency market.
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Investors await upcoming US inflation data for further market direction.
