Indian rupee slides to record low, central bank likely intervenes near 89.50/USD

[MUMBAI] The Indian rupee weakened to a lifetime low against the dollar on Friday (Nov 21), pressured by shrinking risk appetite amid fading expectations of a Federal Reserve rate cut and uncertainty over a US-India trade deal.

The rupee touched 89.48, sliding past its previous all-time low of 88.80 hit in late September and again earlier this month. It was down 0.8 per cent on the day.

Pressure on the currency has persisted since steep US tariffs on Indian exports came into effect in late August. It is now among the weakest major Asian performers this year as foreign investors have withdrawn US$16.5 billion from Indian equities so far.

On Friday, traders said the Reserve Bank of India, which had actively defended the 88.80 level in recent sessions, appeared to have scaled back of its defence and instead likely stepped in near 89.50.

“No one was prepared that the RBI will allow 88.80 to be taken away, and there was hardly anyone on the offer side leading to gap-up moves (on USD/INR),” a trader with a state-run bank said.

This compounded the pressure on the rupee, which is already contending with hedging interest from importers and muted activity from exporters.

There was a sudden spike in volumes once 88.80 broke, a trader at a private-sector bank said.

“89.50 is the new resistance for now (on USD/INR). The RBI seems to relent to a market that has been short INR for quite some time. But a lot now depends on the trade deal. A favourable one can bring USD/INR down materially,” said Dhiraj Nim, an FX and rates strategist at ANZ. REUTERS