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Rupee hits record low on aggressive dollar bids

Indian rupee

The currency dropped to an all-time low of 83.45 in the closing minutes of the session

The Indian rupee reached a record low on Wednesday on aggressive dollar bids by local oil firms, importers and equity-related outflows, while likely central bank intervention capped losses, traders said.

The rupee ended at 83.3725 against the U.S. dollar, down 0.1% compared with its close at 83.28 in the earlier session. The currency dropped to an all-time low of 83.45 in the closing minutes of the session.

The Reserve Bank of India (RBI) stepped in and sold dollars via at least three state-run banks, preventing further losses, according to a trader at a foreign bank.

With heavy dollar demand towards the end of the session, offers thinned after the rupee crossed 83.40, pushing the currency past its earlier low of 83.43 reached on Friday, forex traders said.

The RBI was likely active in the Non-Deliverable Forwards (NDF) market to prevent a further depreciation after close of the domestic trading session, two senior traders at state-run banks said.

The rupee had extended its decline in the Non-Deliverable Forwards market on Friday.

Weakness in the offshore Chinese yuan and the Japanese yen also weighed.

The yen dropped to a 34-year low, prompting an intervention warning from Japan’s finance minister.

The dollar index was little changed at 104.3 while U.S. bond yields were largely flat in Asia trading.

Continued weakness in Asian peers is likely to keep pressuring the rupee but the “proportion of decline could be lower on the back of RBI’s intervention to defend the rupee,” according to Dilip Parmar, a foreign exchange research analyst at HDFC Securities.

Parmar expects the rupee to drop to 83.50-83.70 levels in the near term if the pressure persists.

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