Monday saw an all-time low for the Indian rupee due to ongoing dollar demand by international banks, most likely on behalf of their custodial customers.
The rupee barely made it beyond the previous low of 84.07, which it touched on Friday, and fell to a lifetime low of 84.0725 to the US dollar.
The local currency fell below 84 after being close to that level for almost two months, helped by frequent interventions from the Reserve Bank of India (RBI).
Persistent withdrawals from domestic equities have pressured the rupee this month. Foreign investors have withdrawn around $8 billion over the last ten days.
The rupee was affected on Monday by the weakening of its Asian counterparts as well as traders’ dissatisfaction with China’s stimulus, they said.
The majority of Asian currencies saw decreases of 0.1% to 0.3%, whilst the dollar index remained near its two-month high at 103.
According to a trader at a foreign bank, local private and state-run banks were observed making dollar offers, while major foreign banks dominated dollar bids.
The trader stated that the dollar-rupee pair is expected to trade in the “83.95-84.20 range in the near-term (and) remains a sell on uptick if it moves fast”.
The rupee may receive some relief and move over 84 with the RBI’s support of the currency and possible reduction of equities outflows, according to Amit Pabari, managing director of FX consultancy firm CR Forex.
Traders will monitor the price of Brent crude oil, which fell to $78 per barrel on Monday. However, the price has increased by about 9% in October due to concerns that unrest in the Middle East may affect oil supplies.
Later in the day, Federal Reserve Governor Christopher Waller is scheduled to talk, and he might provide clues on the future direction of policy rates in the United States.
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