The Indian rupee fell to a record low against the US dollar on Friday, pressured by a tumbling Chinese yuan and surging local dollar demand.
The rupee ended at 83.4250 against the dollar – its lowest closing level on record – down 0.3% from its close at 83.1475 on Thursday.
The rupee hit an all-time low of 83.43 near the end of the session and fell 0.7% this week, the steepest decline in seven months.
While the weakness in the yuan was pressuring the rupee since the start of the session, aggressive dollar buying in the final few minutes drove it past previous lows, the head of treasury at a mid-sized private bank said.
Also on AF: Beijing’s Push to Dump Foreign Tech on Display at China Chip Fair
A lack of substantial dollar inflows and a rise in the dollar index also hurt the rupee, traders said. The dollar index was up 0.4% at 104.39 after hitting a month’s high earlier in the session.
Asian currencies elsewhere fell, with the Korean won leading losses, down by 1.2%. The offshore Chinese yuan dropped to its weakest level since November.
The yuan “weakness reflects increased jitters over geopolitical risks that have seemingly resurfaced”, DBS Bank said in a note.
An “artificial dollar scarcity” in the market, reflected in the depressed overnight dollar-rupee swap rate, also contributed to the rupee’s losses, a trader at a foreign bank said.
The closing days of March are likely to be “critical” for the rupee after Friday’s price action, Abhilash Koikkara, head of foreign exchange and rates at Nuvama Professional Clients Group, said.
If the rupee continues to hover near record lows over the next few days, the bias on the unit is likely to turn negative, Koikkara said.
- Reuters with additional editing by Sean O’Meara
Read more:
India, UAE Agree to Ditch the Dollar, Settle Trade in Rupees
Reserve Bank of India Ramps up Testing of its Digital Rupee
Indian Rupee Weakens as RBI Pulls Highest Value Currency Note
Weak Yuan Dents Asia Currencies, Indian Rupee at Six-Week Low
