Some recovery in the domestic stock market following the release of macroeconomic indicators also supported the Indian currency, even as it remained under pressure due to soaring oil prices and continued outflows of foreign funds.
In interbank foreign exchange, the rupee opened at 86.57, hit an intraday high of 86.45 and closed at 86.62 (provisional) against the dollar, up 8 paise from the previous close.
On Monday, the rupee suffered its biggest single-day decline in nearly two years, dropping 66 paise against the US dollar to close at an all-time low of $86.70. The currency’s previous daily record fall of 68 paise was witnessed on February 6, 2023.
The Indian rupee fell to an all-time low on Tuesday, January 14, due to strong dollar buying spurred by the expiry of positions in the non-deliverable forward (NDF) market and possible intervention by reserves. Bank of India (RBI) helped limit losses.
The Indian rupee hit a record low of $86.6475 and closed at $86.63 against the US dollar, down from the previous close of $86.5750. The currency remained under pressure throughout much of the trading session on the back of widespread dollar demand driven by maturing positions in the NDF market.
While state-run banks have been seen offering dollars, probably on behalf of the central bank, foreign banks’ dollar offers are also helping to contain the fall in the rupee.
The domestic currency suffered its steepest single-day decline in nearly two years on Monday, as expectations of a Federal Reserve interest rate cut faded and the dollar hit a two-year high.
The rupee’s one-month implied volatility, a gauge of future expectations, rose to 4% on the day, a 16-month high.
According to Reuters, the central bank intends to use foreign exchange reserves wisely to ease volatility in the domestic currency market amid strong global headwinds.
The dollar index last hit a two-year high of 109.5, which helped lift most Asian currencies.
Jateen Trivedi, Research Analyst, Commodities and Currencies at LKP Securities, said: “The rupee is trading at Rs 86.60 and the US dollar is stable around $ 109.504, while oil prices are in the range of $ 77.50-77. “We saw volatility as the market fluctuated,” he said. Aggressive buying in the capital markets, especially in PSU stocks, coupled with DII inflows in the past two days provided some support to the rupee. ”
“With budget expectations rising, these factors are likely to give further strength.The rupee trading range is expected to be 86.25─86.85 rupees, with participants weighing domestic trends and global direction. We are keeping an eye on the clues,” Trivedi added.
Investors are currently awaiting the release of US wholesale and consumer price inflation data, scheduled for Tuesday and Wednesday, respectively.
