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The Reserve Bank of India’s likely intervention in the foreign exchange market on Wednesday prevented the rupee from hitting a record low, said market participants. The Indian unit depreciated by 9 paise against the US dollar to settle at Rs 83.38 a dollar, after touching the intraday low of Rs 83.45 per dollar.
The rupee had witnessed a record low of Rs 83.48 (intraday) against the dollar on November 10, 2023.
“INR has seen an abrupt depreciation in the last 2-3 trading sessions due to Chinese yuan depreciation adding pressure on emerging economy currencies,” said Harsimran Sahni, EVP & Head – Treasury at Anand Rathi Global Finance.
“Foreign exchange reserves are at an all-time high as RBI has been adding foreign exchange in the past few months which led some market participants to cut their short position thereby leading to unwinding of USDINR short trade. FPI having unhedged rupee exposure has been selling government bonds after rupee weakened and also added pressure on the rupee,” added Harsimran Sahni.
According to RBI data, India’s foreign exchange reserves were at $642.49 billion as of March 15, 2024.
The rupee had settled at a record closing low of Rs 83.43 against the US dollar on Friday. Market participants speculated that the RBI did not intervene in the foreign exchange market towards the end of the trading hours on Friday, which led to the sharp depreciation in the local currency.
“The rupee volatility will continue with weakness visible in the rupee. RBI intervention shall keep the rupee somewhat supported on fall towards 83.50. A 83.20-83.55 range can be seen in the rupee,” said Jateen Trivedi, VP Research Analyst at LKP Securities.
The market participants expect the volatility in the rupee to continue on Thursday, given it is the last trading day of the current financial year.
“Tomorrow, being the last day of the financial year, we may see some selling in the $ rupee but expect dollar bids at all lower levels. The reason being Asian currencies are well bid and the market will be closed for two days….on Friday and Monday. RBI will be present to protect the rupee from falling below the 83.40 levels, but it will be a wait and watch story. At the time of writing today’s closing views, NDF was quoting at 83.35, probably well protected by RBI,” said Anil Kumar Bhansali, Head of Treasury and Executive Director at Finrex Treasury Advisors LLP.
The rupee, having depreciated 0.6 per cent against the US dollar in March, so far, is likely to rebound in April, largely on the back of foreign inflows ahead of India’s government bond inclusion into JP Morgan’s Government Bond Index-Emerging Markets (GBI-EM), set to begin at the end of June 2024.
First Published: Mar 27 2024 | 9:04 PM IST
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