MUMBAI: The Indian rupee logged a monthly fall and closed just shy of its record low on Friday, largely supported by intervention by the central bank which countered pressure from outflows and a pickup in appetite to wager against the currency.
The rupee closed at 89.4575 against the U.S. dollar, down 0.6% on the month and a whisker away from its record low of 89.49 hit on November 21.
Traders pointed to broad-based dollar demand which ran into central bank’s intervention, keeping the currency pinned near its all-time low for much of the session.
Earlier this week, the International Monetary Fund reclassified India’s foreign exchange framework as a “crawl-like arrangement”, two years after branding it “stabilised”.
The rupee has been pressured by a widening goods trade deficit, weakness in portfolio inflows and concerns over “the central bank’s ability to intervene given that it is already significantly short (on USD/INR) in the non-deliverable forwards market,” Abhishek Goenka, chief executive at FX advisory firm IFA Global, said.
India’s merchandise trade deficit hit a record high in October amid a surge in gold imports and a decline in exports to the U.S. following the imposition of up to 50% tariffs.
India expects to secure a trade deal with the U.S. before the end of this year as “most issues have been resolved, India’s trade secretary said on Friday.
Elsewhere, the dollar index was up 0.2% at 99.75, on course for a weekly fall as investors held firm to wagers that the Federal Reserve will cut interest rates next month.
Asian currencies were trading mixed with the offshore Chinese yuan hovering near its strongest level in a over a year while the Korean won was down 0.5%.
The focus now turns to India’s GDP growth data for the July-September quarter due later in the day.
American Dollar Exchange Rate