What’s the story
The Indian rupee (INR), Asia’s worst-performing currency this year, is inching closer to a new low.
The currency fell for the third consecutive session on Monday, closing at 88.7988 against the US dollar.
This comes despite the Reserve Bank of India (RBI)‘s recent interventions aimed at stabilizing the rupee by selling large amounts of dollars last month.
RBI intervenes in forex market to prevent further depreciation
Despite the RBI’s efforts to stabilize the rupee, the currency has struggled to maintain its gains.
The central bank has been selling small amounts of dollars in recent days, preventing the rupee from breaching its record low of 88.8050 per dollar, according to the traders familiar with these transactions.
However, this intervention is relatively smaller compared to last month’s large dollar sales.
Rupee under more depreciation pressure despite RBI intervention
Sakshi Gupta, a senior economist at HDFC Bank Ltd., has said that the rupee is still under more depreciation pressure despite RBI’s intervention.
She said, “The short dollar story has kind of run its course.”
The currency remained stable in October after five consecutive months of losses, mainly due to the RBI’s actions.
However, it has declined by some 3.6% this year against gains of over 3% in most other emerging Asian currencies.
What next for rupee?
RBI Governor Sanjay Malhotra has clarified that the central bank does not target any level or price band for the rupee.
Dhiraj Nim, a currency strategist at Australia and New Zealand Banking Group, said, “The RBI may not let the 89 level break significantly unless there are other economic fundamentals that start working against India and the rupee.”
This indicates a careful approach from the RBI amid external pressures on India’s currency.
