The Indian rupee fell to a new low on Monday, under pressure from weak regional currencies and continued outflows from local stocks, but intervention by the Reserve Bank of India, the country’s central bank, helped avoid sharp losses.
The currency closed at 84.3925, surpassing its previous record low of 84.3875 recorded last week. The coin fell 0.02% on the day.
Demand for dollars from oil companies and foreign banks, possibly on behalf of custodial clients, kept the rupee under pressure, a sales representative at a foreign bank said.
Foreign investors have withdrawn a net about $2.5 billion from Indian stocks during November so far, adding to the $11 billion in outflows in October.
Asian currencies fell 0.1% to 0.6% while the dollar index rose 0.3% at 105.3, hovering near the four-month high recorded last week after Donald Trump won the US elections.
China’s offshore yuan, the rupee’s closely watched counterpart, fell 0.2% at 7.21. China unveiled a stimulus package on Friday that disappointed investors who expected a bigger fiscal boost.
Analysts expect Trump’s policies to put upward pressure on US inflation and bond yields, while limiting the Federal Reserve’s scope to ease policy.
“We see the dollar strengthening at the end of the year,” ING Bank said in a note. The bank expects the dollar index to consolidate in the range of 104.5-105.5 before rising.
Meanwhile, dollar-rupee forward premiums fell with the implied one-year yield falling to a more than two-month low of 2.10%, under pressure from strong take-home interest from foreign banks.
