Rupee closes at a record low of 83.4250/$

Mumbai

The Rupee tanked to close at a record low on Friday, weighed down by a weak offshore Chinese Yuan and strong local demand for Dollars from corporates and investors.

The Indian unit weakened to close at a record low of 83.4250 per Dollar against previous close of 83.1475, down about 28 paise. Intraday, INR tested a low of 83.43.

The last time the Rupee declined to its all-time low of 83.4750 was on 10th November 2023.

Currency Dynamics

Amit Pabari, MD, CR Forex Advisors, observed that today’s decline in Rupee was primarily influenced by the performance of the Chinese Yuan, particularly its offshore counterpart. The offshore Yuan saw a decline from 7.2180 to 7.28 after PBOC officials hinted at further room to reduce bank reserve requirements.

Also, there had been a significant dollar demand as Indian companies and investors repatriate funds, buy dollars to settle accounts and hedge foreign exchange exposures to fulfill import obligations, he added.

“Further, the corporates make financial decisions towards the end of the financial year to optimise tax outcomes which may involve repatriating funds or restructuring investments.

“This could have impacted currency flows and, consequently, pressured the rupee,” Pabari said.

He opined that RBI’s action will play a crucial role and it would be interesting to see how it optimises the tools available to curb the free fall when the markets open on Tuesday.

Hitesh Jain, Strategist, Yes Securities India Ltd, said a stronger Dollar Index and sharp fall in the Chinese Yuan is weighing on emerging market currencies, with Indian Rupee bearing the brunt.

“Nevertheless, we see the Indian Rupee rebounding from the record lows as RBI is seen intervening at these levels. Moreover, strong foreign capital inflows and lower current account deficit remains supportive of the currency,” he opined.

Meanwhile, government securities (G-Secs) yields rose due to record borrowing plans of States at the next weekly auction.

Yield of the widely traded 10-year benchmark G-Sec (coupon rate: 7.18 per cent) rose about 5 basis points (bps) to close at 7.0927 per cent against previous close of 7.0477 per cent.

Price of this paper declined about 31 paise to close at ₹100.58 against previous close of ₹100.8875.

Sixteen States and two Union Territories will be collectively borrowing ₹60,032.49 crore via auction of State government Securities (SGS) on March 26.

This will be the highest collectively borrowing by States and UTs at a single auction in FY24 so far against the previous high of record borrowing of ₹50,206 crore on March 19.