New Delhi: The RBI on Thursday intervened to steady the rupee as it plunged by 30 paise to hit to all-time low of 68.86 on Thursday due to broad strength in the US dollar, capital outflows from emerging markets, and worries about the demonetisation drive.
Rupee had hit its all-time intra-day low of 68.85 and closed at 68.80 on August 28, 2013. The intervention from the Reserve Bank of India sparked a slight rebound in the rupee to 68.83, two traders said.
The rupee has fallen around 3 percent so far this month, its biggest fall against the dollar since August 2015, though it has fared better than many other emerging market currencies have done since Donald Trump’s shock win in the US presidential election.
Traders spotted the Reserve Bank of India intervening when the rupee fell to around 68.83 per dollar and more heavily later in the morning, sending the rupee sharply higher to 68.74. The central bank likely sold around $500 million so far in the morning, the traders said.
Expecations that President-elect Trump will pursue an expansionary fiscal policy that will drive inflation higher and lead to higher US interest rates, are behind rising US yields that have attracted investors to the dollar.
Although foreign investors are pulling money away from Indian bonds, analysts say India’s strong economic growth should sustain investor interest in equities, while foreign exchange reserves are at a near record high while inflation remains low.
There are worries, however, that Prime Minister Narendra Modi’s shock move this month to ditch higher-denominated banknotes could dent the growth rate.
India is also still seeing outflows tied to the redemptions of dollar deposits, or foreign currency non-resident accounts (FCNR), that were raised from Indians living abroad to help pull the rupee out its crisis three years ago