MUMBAI: The rupee continued to bleed for the third consecutive day on Thursday, pressured by a firm dollar and importers’ month-end dollar demand. At the end of the market hours, the currency lost 6 paise against the dollar at 85.2625 from 85.20 in the previous session and had an all-time low of 85.2825 intra-day.
A trader said importers were very active in the market, though trading volume was relatively low as the year-end is nearing. It can be noted that the rupee’s drop to 85 from 84 happened over two months, while the decline to 84 from 83 took nearly 14 months.
Yet in terms of the real effective exchange rate (REER) at over 108.14 in November, or its value relative to multiple foreign currencies after adjusting for inflation, it is still at record high as its pair currencies have lost much more than the rupee.
Since slipping below 84 in mid-October, the rupee has been falling gradually amid growth slowdown, massive foreign outflows (over $12 billion in a month), worries over US president-elect Donald Trump’s trade policies and a hawkish Federal Reserve.
However, persistent interventions from the Reserve Bank have kept the rupee’s decline in check. According to RBI, it has sold more than $47 billion in October alone to defend the rupee.
According to the RBI bulletin for December, the Reserve Bank net sold $9.28 billion in the spot forex market in October while the net outstanding forward sale stood at $49.18 billion compared to the net sale of $14.58 billion in September.
The central bank said it purchased $27.5 billion and sold $36.78 billion during October. As against this the central bank has bought a net of $9.64 billion in the spot market in September. It can be noted that October was the most volatile month for the rupee which began with foreign funds starting a selling spree of domestic equities and then Donald Trump winning the US presidential polls only added to the pain for the currency.