The rupee ended the day at 89.23 to the US dollar, up 0.3% from its close at 89.48 the previous session. The local currency, which was trading weaker around 89.60/$1 levels in the offshore non-deliverable forwards market (NDF), opened stronger at 89.15 Monday as the Reserve Bank of India sold dollars minutes before the onshore market opened at 9:00 AM, dealers said. The rupee traded in a 22-paise range of 89.29 to 89.07 during the day.
“Today’s trade was majorly dominated by the Reserve Bank, and it seems like they will protect this 89.49/$1 record-low level. For now, we are asking importers to buy on all dips and cover positions every day,” said Ritesh Bhansali, deputy chief executive of Mecklai Financial Services.
RBI governor Sanjay Malhotra said on Monday that the rupee’s recent weakness was a natural outcome of the inflation gap with advanced economies. A 3.0-3.5% annual drop is typical for the currency, he added, noting that the RBI’s focus is on containing excessive volatility rather than defending any specific level.
Gaining currency Re logs biggest one-day gain in a month, appreciates 0.3% against dollar
The rupee, which hit a new low against the dollar on Friday as the RBI stopped intervening, is Asia’s worst performer this year, having weakened about 4% against the greenback.The RBI has maintained its position that it intervenes in the foreign exchange market to curb excess volatility and does not target a specific level. Markets however expect the Reserve Bank to protect the record closing low of 89.49.”Exporters and importers need to be on the lookout for RBI intervention. Dollar sales from the central bank have increased the forward book, and I expect RBI’s short positions to likely be around $70 billion by the end of November,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
For September, RBI’s short positions were $59.5 billion. The data for October aren’t available.