The Indian rupee opened at 89.40, down 0.1% from the previous closing of 89.30 per US dollar. Due to the imbalance between strong importer hedging and cautious exporter flows, the rupee began lower on Friday, keeping it dependent on central bank support and susceptible to a lifetime low.
After closing at 89.3050 on Thursday and within striking distance of last week’s all-time low of 89.49, the 1-month non-deliverable forward showed the rupee opening today in the range of 89.40–89.42 versus the US dollar.
Onshore one-month future premium at 14 paise. Dollar index at 99.62; non-deliverable rupee forward at 89.52. At $63.3 per barrel, Brent crude futures are unchanged. The yield on a ten-year US note is 4.01%.
In an effort to stop the cycle of weakness that threatened to worsen following last week’s breakdown, the Reserve Bank of India intervened significantly at the start of the week. The rupee was momentarily propelled back through the 89 handle by its intervention, providing a small respite. However, the respite diminished as a large portion of the RBI-spurred rebound was undermined by reluctant exporter hedging, prolonged dollar demand from importers, and poor portfolio flows.
Growing expectations that the Federal Reserve would lower interest rates for the third time in a row next month, which would typically provide some reprieve for the rupee, are driving the dollar index toward its worst week in four months. Given the weakness of the dollar, it is significant that the rupee is once again under pressure despite the RBI’s support.
