The Indian rupee declined marginally to close at a record low, influenced by the weakness of other Asian currencies, despite sporadic dollar-selling interventions by the central bank towards the end of trading. According to traders, these dollar sales did manage to prevent more significant losses.
The rupee ended at 83.5650 against the U.S. dollar, 0.1% lower than its previous session close of 83.5050. The Indian currency has been lingering close to its all-time low of 83.5750, reached in April, but regular market intervention by the Reserve Bank of India has helped to curb the decline, according to traders.
Data from a local clearing house revealed that choppy trading last week, driven by the national election results, led to an uptick in hedging activities by importers and exporters.
Today, most Asian currencies declined, with the Korean won experiencing the largest drop at 0.2%. Meanwhile, the dollar index edged up to 105.2. According to a note from ING Bank, the dollar index must close below the “gap support” level of 104.95 to alter the otherwise bullish near-term forecast.
“Don’t think there’s a lot of fresh positioning (on USD/INR) currently as people are mostly waiting for Fed and U.S. (inflation) data,” a foreign exchange trader at a private bank said.
“State-run banks’ offers were present but they were not hammering (USD/INR) lower,” the trader said.
Traders were anticipating the upcoming policy decision from the Federal Reserve, scheduled for Wednesday, in which the central bank is anticipated to maintain interest rates at their current levels. The focus will be on the comments from Fed Chair Jerome Powell and any adjustments to the interest rate dot plot.
Additionally, the significant U.S. consumer inflation figures are expected on Wednesday as well. According to economists, the core CPI is predicted to remain unchanged at 0.3% month-on-month in May.