Rupee hits new low of 84.71/$ before RBI intervention caps further weakness
Bank of India (RBI) likely sold dollars to cap weakness in the local currency, traders said. Along with the dollar's rally, the Chinese yuan also weakened to counter the trade tariffs effect, adding pressure on the local currency.
Analysts expect the pressure on rupee to continue during December and January, as inflows from foreign portfolio investors are not expected at least till January.
“The RBI was continuously there in the market today as dollar pressure continued. Plus foreign investor buying will continue only after January once Trump takes over and uncertainties get ironed out,” said KN Dey, currency risk analyst at United Financial Consultants. “Equities are positive today, but that is because of buying from domestic investors,” he said.
RBI likely sold about $2 billion on Tuesday to cap excess volatility in the currency, traders said.
Despite the recent weakness in the currency, analysts are expecting the rupee's real effective exchange rate (REER) to rise marginally as the rupee mildly appreciated in comparison to the Chinese Yuan. Rupee was overvalued by 7.21% as of October 31, according to RBIs latest bulletin.
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