By Siddhi Nayak
MUMBAI (Reuters) – The Indian rupee settled at a record closing low for a third consecutive session on Thursday, pressured by a firm dollar and importers’ month-end dollar demand.
The rupee ended at 85.2625 to the dollar, against 85.20 in the previous session. It hit an all-time low of 85.2825 earlier in the session.
“Importers were pretty active in the session, while trading volumes were relatively low towards the year-end,” a trader with a private bank said.
The rupee’s drop to 85 from 84 happened over two months, while the decline to 84 from 83 took nearly 14 months.
Since slipping below the 84 handle in mid-October, the rupee has been falling gradually amid concerns over India’s growth slowdown, foreign outflows, worries over U.S. President-elect Donald Trump’s trade policies and a hawkish Federal Reserve.
Persistent interventions from the Reserve Bank of India (RBI) have, however, kept the rupee’s decline in check.
Amid repeated interventions from the RBI, the real effective exchange rate of the rupee, or its value relative to multiple foreign currencies after adjusting for inflation, stood at a multi-year high of 108.14 in November.
“This means that the rupee is overvalued and hence, any major upside can be ruled out,” said Anil Bhansali, head of treasury at Finrex Treasury Advisors.
As such, any dip on the dollar-rupee pair is a buying opportunity, with the rupee expected to remain in a weakening mode, Bhansali said.
The dollar has rallied against its major peers and Asian currencies, helped by the rise in U.S. Treasury yields and supported by expectations that the Federal Reserve will cut rates at a measured pace next year.
Fed policymakers indicated earlier this month that they will deliver fewer rate cuts in 2025 than they had previously forecast.
(Reporting by Siddhi Nayak; Editing by Mrigank Dhaniwala)
